Cozy allowed payment reversal that withdrew previously paid rent

[Alyssa K.]

I received an email from Cozy stating that a tenant disputed their rent payment/marked it as fraudulent with their bank. Cozy then reversed the payment, which had already been deposited into my account, and withdrew it. I’m livid that Cozy would allow a payment that had already been received to be removed from my account. I spoke with the tenant and they said there was a window between when her paycheck cleared and rent was removed, and is claiming her bank flagged the payment due to insufficient funds. I find it hard to believe that a bank would then mark a payment as fraud rather than charging the account holder for the “bounced check”. I’m also very concerned that now, apparently, at any given time a tenant can dispute their rent and it will be taken from my account?! Has anyone else experienced this? Cozy has made managing my own properties easy, but if they can take my money at any given time just because the tenant or tenants bank says so, I’m thinking I’ll have to switch to snail mail and cashiers checks. Anyone have another online service they prefer that puts the landlord first?

[Joe Splitrock]

@Alyssa K. this is not Cozy's fault. The tenant reported the withdrawal to their bank as fraudulent. Cozy's processor is required to reverse the payment. There are different codes used for NSF versus fraud rejections.

ACH bank transfers and paper checks are equally secure. A tenant could come back weeks or even months later and report either ACH transactions or paper checks as fraudulent. In both cases the money is pulled from your account. Of course falsely doing so can have repercussions for the tenant.

The problem here is the tenant. I have been taking checks for 16 years and ACH for ten years. Nobody has ever reported a payment as fraudulent. I have had bounced checks and bounced ACH deposits, but in all cases the tenant owned up and paid all the fees.

I would demand a cashiers check immediately from the tenant plus any fees you incurred. If they keep giving you the run around, start the eviction process. You have a problem tenant that needs to be dealt with.

Cash app and Zelle are more secure electronic payment options, but I believe both have send and receive limits that are prohibitive for business use. They do work like cash, so the money cannot be recalled. Neither is really meant for business use.

Most every tenant payment system or bill pay system in general uses ACH, same as Cozy. Again the problem is the tenant, not the payment method.