Security deposits, pros/cons, on using Obligo as a security deposit alternative?

Question

I just heard about Obligo.com Does anyone have any experience with this, as either a landlord or a renter?

Nathan Gesner · Answer

I've used them, and I know a lot of professional property managers that do.

Obligo is a "billing authorization" system. Tenant keeps a bank account and credit card on file with Obligo, and they authorize Obligo to withdraw money up to a certain dollar amount. Tenant pays a monthly fee for this service in lieau of a traditional security deposit.

EXAMPLE: you require a $3,000 security deposit. Instead, tenant signs up for Obligo and pays $17 per month, authorizing Obligo to withdraw up to $3,000 after the lease terminates. Tenant moves out, you spend $600 on cleaning and repairs, you file a claim, and Obligo pays you $600 in three business days.

Here's the real good news: Obligo pays you every time. If the tenant closes their accounts to prevent Obligo from collecting (this rarely happens and has never happened to me), Obligo still pays the Landlord and goes after the tenant. If the tenant contests the charges, Obligo still pays the landlord and the Tenant has to fight with the landlord to contest the charges.

Services like Rhino are more like a traditional insurance policy. Instead of pulling money from the renter's account, Rhino is paying the claim out of their own pocket and then going after the tenant for reimbursement. This results in a lot of rejected claims from landlords. A friend of mine just filed a claim with Rhino and it took a month for approval. Insurance is not a good product to replace security deposits.

Victoria Redlin · Answer

Thank you for the through reply. This sounds like a good product for the right situation. It makes a lot of sense to me.                                                                                                                          I currently handle the leases and collecting rent. I want to get this process more automated. I'm looking into the different software programs available. I think Obligo is totally independent of those programs. If there's any input regarding that I thank you in advance.