The forest and the trees: questions after erentpayment issues

[Steven Loveless]

Many of you probably know about (or worse have lost money with) the erentpayment.com SNAFU; I was lucky that I had payments processed right before this all happened. (Link for those that are interested: BP erentpayment.com thread)

I've come to a serious realization from this that I have overlooked a major component of my business. Most landlords go through hoops of due diligence vetting tenants, contractors, and the properties themselves. We have inspections, call in experts, run credit and background checks more in depth than most employers, and ask for references.

However, for the actual lifeblood of the business - cash flow- I found a website that looked pretty and offered some services that seemed to gel with what I needed at the time and signed up. I didn't consider the fact that pretty much anybody can pay to setup a pretty website with good functionality and contract with a third party payment processor. I didn't check their background, I didn't talk to the owner, I didn't check to see that they had insurance or fundamentally understand how they handled my resident's payments. Luckily it didn't bite me in the ***, but it easily could have. 

I completely ignored a concept of counter-party risk - something I am 100% familiar with analyzing in my paper investments, but didn't even really think about in my RE investments.

Now I have to search for a new method of payment and am asking myself the question - "what don't I know that I don't know"?

I'm struggling with these two questions, and would love input from some other folks on BP:

1. How do you vet your financial/legal/etc. third party partners?

and

2. What other counter-party risk am I completely ignoring in my business?

[Patrick M.]

@Steven Loveless I think you would like to see a guarantee by Cozy for lost funds. The problem is that with the business model they never control your money, so how could they ever begin insuring it or guaranteeing it. They use Stripe for as a conduit for ACH transfers.  

https://cozy.co/blog/how-payments-work-at-cozy/

They are not moving your money from one companies account to another companies account to your account like ERP. So there is no risk that one of those companies will up and decide- "hey I want to keep your funds." Like happened with ERP.

Further, you believe if this happened to someone else, ERP would have come out with a similar message as Cozy. Lets take a moment to examine that. Based on the utter lack of communication and attempts to spread misinformation by ERP- I would not put it past them... but have you seen their 3rd party companies myspace webpage? Additionally they would have never been able to claim that funds were not being held by their vendor and in this case, their vendor's vendor- yeesh.

Cozy has explained what it does and laid bare its process and its partner, Stripe. This is part of why you started this thread- "What do we really know?" They have tried to answer this as effectively and expediently as possible (They were out immediately when ERP was still floating different versions of events, when they decided to make radio contact.)

I would suggest that you look into Zelle or perhaps get a business account with your bank and pay for ACH payments. I am very happy with Cozy. I am satisfied and confident in their explanation. They have developed a host of ways to make money while still providing free rent payment transfers. That is good business and I love that they are 100% devoted to landlords and tenants.