ACH payments vs Cozy payments, any downsides?

Question

Hi, I just read a very similar discussion where the poster asked about a better method of collecting rents than direct bank deposit by tenants. Some of the comments were to use Cozy or ACH payments? I didn't quite understood and wanted to reply to the discussion with my questions, but the site kept asking me to setup a company first, so I couldn't get around that and had to post a separate discussion.
So here are my questions.

Are there any downsides to using Cozy.co to collect rents? my 8 tenants are low income field workers who might not know how to use (or trust) an online payment system.  I guess I could train them, but before I move in that direction, I'd like to know if there will be any problems that I'm not anticipating, or if there is anything I should prepare for if I start receiving rents online.

@John T. mentioned ACH, but I wasn't sure if that's the same as Cozy.co's rent collection.

I'm currently collecting cash myself every month, but the comment from @john T. made me think I'm actually in the pre-stone age, and I'd like to "evolve" as a landlord.

Any advise anyone on what to prepare for if I move into collecting rents online?

Also, I'm using my visits to collect rent every month to take a look at each property and see how the tenant is taking care of it.  If I go into online payments, I guess I will have to schedule inspections separately from rent collection.  If so, what is the "standard/recommended" interval for inspections?

Thank you all

Dan Crenshaw · Answer

I know this is an older post, but here’s an issue I just ran into with Cozy. I had a tenant move out early, and the day before she did, she disputed her Feb Cozy payment with her bank. She got her money back. Then, because she got away with it, she did it for January as well. I talked to Cozy and they can’t do anything about it. Shockingly enough, neither can the banks. I have to take her to small claims to TRY to get it back. Cozy offers NO protection against old tenants committing this kind of fraud.

Dan Crenshaw · Answer

@Kenny Dahill She used a checking account. I wonder if it would be any different with a credit card.  Either way, it’s a horrific mess.

@Ryan Mahoney I’ve been using them for about 18 months so far, and aside from this, I haven’t had any issues. It’s just the lack of fraud protection is a scary thing that other investors probably don’t know about. Hopefully you never have to deal with this.

PJ M. · Answer

It's not just Cozy but any 3rd party payment processor that allows credit cards to be used.  There are some, Tenant Cloud I think is one of them (not a customer of theirs), that I believe lets the landlord set up whether they want to accept credit cards as a payment option.

I think you'll start hearing horror stories of accepting 3rd party processors and credit cards more and more.  Paypal was the golden child when it first came on the scene for online payments.  Now there are horror stories galore how they side with the buyer and not the seller on lots of things.  If they get a dispute from a credit card company, they operate very similarly.  Even they have the direction of "We don’t initiate or handle chargebacks – the buyer's credit card issuer does. So that process follows the issuer’s policies. We also don’t judge the validity of a chargeback; that’s the responsibility of the card issuer. Our role is simply to collect information about the transaction and help you work with the card company to resolve the chargeback."  If that's not a "we'll try to help but it's all on you and out of our hands" answer I don't know what is.

Good screening will help but, as any experienced landlord will tell you, a good relationship can go south easily.  A miscommunication, misunderstanding, or unmanaged expectation of a situation can cause a tenant to feel like they have been wronged.  Just imagine if that tenant can then go back to their credit card company and dispute a charge because they feel the service was unsatisfactory.

Dave Chow · Answer

Sounds like landlords need to close their bank accounts with cozy if knew this would happen.

PJ M. · Answer

This is a risk with any payment processor that allows credit cards to be used.  Credit card companies are there to protect their customers.  That's the consumer.  Most people don't realize it but satisfaction with your purchase is a valid reason to dispute a charge.  Yeah, you read that right, if you are unhappy with the product or service you received you can dispute that charge.  It then falls to the vendor to provide the backup showing that the product or service was provided exactly as described.  In the case of 3rd party processors, that is them, not you.  So it would fall to Cozy to be the middleman and fight the battle for you.  However, what proof does any landlord have that the goods and services were acceptable?  All it takes is an unscrupulous (or disgruntled) tenant to go to their credit card company and say "the landlord didn't provide X which I asked for repeatedly so please reverse these charges".  The credit card company will then open a case, reverse the charges, and request proof that "X" was completed and accepted by the tenant.  If the tenant is lying, you won't have any proof and will just say "Nope, they're lying".  Who do you think the credit card company will wide with?  their customer or some vendor who is representing a 3rd party that they never have to talk to or deal with?

Donielle LaVern · Answer

@Dan Crenshaw

@Kenny Dahill My tenant just did this with his last April Payment and it was via credit card.  I have sent out my demand letter and I'm sure I will have to take him to small claims court.  Uggghh, neddless to say I will not be using Cozy to collect payments again and I have been using them for 2 years.

Ryan Mahoney · Answer

I have been using Cozy with 4 tenants for almost a year now.  No issues.  I have one tenant who sometimes likes to pay with a personal check and it has been easy to enter offline payments into the system.  I found that exporting the data for tax purposes was very convenient as well.

It is a little scary to hear that someone can dispute past payments and get their money returned with no recourse for the landlord.  Luckily I have not had that problem.

Kenny Dahill · Answer

Hi @Dan Crenshaw, I am curious if the tenant paid through Cozy via direct deposit or with credit card.  I have heard stories of consumers doing the same on their credit cards, not for rent but other high ticket items.

I haven't heard stories on users being able to do that from direct deposit.

Taylor Roeling · Answer

@Dan Crenshaw

Taylor Roeling · Answer

Hi Dan,

That is very frustrating there are no protections against old tenants doing that not just once, but multiple times. I'm curious to what type of renters insurance you?

ACH payments vs Cozy payments, any downsides?

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