Cozy allowed payment reversal that withdrew previously paid rent

OP

Member since 2018 · 156 posts · 106 votes

7y

@Mike S. Thank you! I’ll look into this.

PJ M.

Philadelphia, PA · Member since 2019 · 174 posts · 124 votes

7y

I'd be interested to know if this was them marking it as fraudulent or if this was a reversal where they paid by credit card.

I have a suspicion that this is going to become a lot more common as people are taking credit cards for payments. I've mentioned a few times where Cozy has an issue in that they don't permit you to choose which payment types you will accept. So when you sign up for their service you may not even realize that a tenant is paying you by credit card. Then suddenly the tenant reverses charges and the landlord is hit with the money removed from their account. The big thing with credit cards is that you don't have to claim fraud as a reason to reverse charges. You simply need to claim that you didn't get or weren't satisfied with your purchase. The card company will reverse that charge because the tenant is their customer. 3rd party payment processors don't have the regulations placed n them for investigation, etc that banks do. So credit card companies then toss it to the 3rd party processor to prove that the charge was valid. A lease doesn't mean squat if a tenant claims "The landlord didn't repair the hot water heater for the last 2 months of my tenancy". How is a landlord going to prove that a statement like that is false?

7 Reply

Karl B.

Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes

7y

You could always create another checking/savings account with the same bank. Once the rent(s) are deposited by Cozy you log into your online banking and transfer the money from the account Cozy has access to to your second checking/savings account.

That way if Cozy attempts to remove money in the future the account they have access to will be at zero as you transferred the money.

14 Reply

OP

Member since 2018 · 156 posts · 106 votes

7y

@PJ McLaughlin I was worried about the same, and so I require tenants use ach transfers from their bank and don’t accept payments via credit cards, I also require payment to be received by the due date, not simply posted and pending through Cozy, money must be in my account by the 1st; thinking these measures would save me from this pitfall. unfortunately that doesn’t seem to be the case, and I’m dumbfounded. I’ve now filed paperwork with my bank that Cozy is only allowed to deposit, not withdraw, however this whole situation has caused me to loose trust in Cozy as a whole. The tenant rescheduled their payment, but as it is processing over a holiday, it’s not expected to be processed and re-deposited until the 8th. My partner now wants to begin the eviction process in the event they try to revoke that payment too and our paperwork at the bank turns out to be useless.

This tenant has no reason to not pay based on any service requests, as I’ve always resolved issues same day.

Just never dreamed I’d need to worry about rent AFTER it’s in my account and one it’s way out the door to pay the mortgage.

OP

Member since 2018 · 156 posts · 106 votes

7y

@Karl B. Would you then make your tenant responsible for any overdraft fees from your bank that you are hit with if Cozy tried to withdraw and there are insufficient funds?

4 Reply

Karl B.

Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes

7y

Originally posted by @Alyssa K.:

@Karl B. Would you then make your tenant responsible for any overdraft fees from your bank that you are hit with if Cozy tried to withdraw and there are insufficient funds?

I would, 100%. And it would make it easier to have a rebuttal in the event a tenant says, "That's not fair!" by including something in your lease stating a tenant is responsible for overdraft fees, even if a 3rd party such as Cozy, their credit card company, etc. performs the attempted withdrawal.

3 Reply

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

7y

@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.

17 Reply

OP

Member since 2018 · 156 posts · 106 votes

7y

@Karl B. Great suggestion, thank you!

Caleb Heimsoth

Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes

7y

@Alyssa K. There are several threads on this issue. Most my tenants pay with a money order. Makes it impossible to reverse like this

OP

Member since 2018 · 156 posts · 106 votes

7y

@Joe Splitrock definitely not Cozy’s fault it happened, I was just taken aback that it’s allowed under their system. I thought I protected myself from this situation by requiring they use the ach option over the credit card option, obviously not. Your explanation of the various ways something similar could happen makes sense.

The payment being marked as fraudulent is what concerns me as well. The tenant told me that she had insufficient funds and her bank did all this as a result, however Cozy emailed me stating the tenant marked the payment as fraudulent through their bank. I’m more inclined to believe Cozy, and don’t think a bank would mark a payment as fraud due to insufficient funds, but would rather charge the account holder an overdraft fee.

They have scheduled another payment, won’t be received until the 8th, however my husband wants to begin the eviction process even with the payment pending to get the ball rolling in the event we need to follow through.

OP

Member since 2018 · 156 posts · 106 votes

7y

@Caleb Heimsoth that will most likely be the route I take with these tenants moving forward if I don’t evict.

Dennis M.

Rental Property Investor · Erie, PA · Member since 2018 · 6k+ posts · 9k+ votes

7y

Another reason why I prefer being paid by uncle Ben

He never jumped out of my pocket

Melissa Gittens

Real Estate Broker · Windsor, CT · Member since 2015 · 1k+ posts · 268 votes

7y

I have never used Cozy this can probably happen with any system that takes electronic payments... I would have charged the tenant a late/or bounced check fee since I am assuming your bank may charge you as well for the fraudulent transaction.

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

7y

Originally posted by @Alyssa K.:

@Joe Splitrock definitely not Cozy’s fault it happened, I was just taken aback that it’s allowed under their system. I thought I protected myself from this situation by requiring they use the ach option over the credit card option, obviously not. Your explanation of the various ways something similar could happen makes sense.

The payment being marked as fraudulent is what concerns me as well. The tenant told me that she had insufficient funds and her bank did all this as a result, however Cozy emailed me stating the tenant marked the payment as fraudulent through their bank. I’m more inclined to believe Cozy, and don’t think a bank would mark a payment as fraud due to insufficient funds, but would rather charge the account holder an overdraft fee.

They have scheduled another payment, won’t be received until the 8th, however my husband wants to begin the eviction process even with the payment pending to get the ball rolling in the event we need to follow through.

My wife works at a bank and deals with compliance. Bank is required to reverse if fraud is reported. There are specific rejection codes for fraud versus insufficient funds. Banks are regularly visited by federal auditors and work hard to keep in compliance with properly handling transactions. I am not saying the bank couldn't have made a mistake, but it is highly unlikely. If the bank did make a mistake, the bank manager would happily call you to explain.

Cozy has no way to fight pull back in case of NSF or fraud reports. You or I could report our electronic mortgage payment as fraud and it would be pulled back from any bank. It sounds scary, but it is setup that way as a consumer protection. Normally there is no issue, because liars and scammers have trouble keeping bank accounts open.

I would ask the tenant to give me a cashiers check or cash for this month. That is the only way to tell if they really have the money. Then next month, if you want to return to ACH, I don't see an issue. If the money does go ACH, have them add late fee and NSF fee. You can manually add this on Cozy as a one time payment.

Joe SplitrockPro Member

Moderator

Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

7y

Originally posted by @Dennis M.:

Another reason why I prefer being paid by uncle Ben

He never jumped out of my pocket

Of course with cash you have to worry about fake bills and robbery. Not to mention the hassle of handling it. I love electronic payment for the hands off aspect. But certain tenant types I would accept nothing but cash. Just depends on who you are dealing with. Well screened tenants in B class properties will never be an issue no matter what pay method.

Account Closed

Rental Property Investor · Central, FL · Member since 2016 · 950 posts · 821 votes

7y

Originally posted by @Alyssa K.:

@PJ McLaughlin I was worried about the same, and so I require tenants use ach transfers from their bank and don’t accept payments via credit cards, I also require payment to be received by the due date, not simply posted and pending through Cozy, money must be in my account by the 1st; thinking these measures would save me from this pitfall. unfortunately that doesn’t seem to be the case, and I’m dumbfounded. I’ve now filed paperwork with my bank that Cozy is only allowed to deposit, not withdraw, however this whole situation has caused me to loose trust in Cozy as a whole. The tenant rescheduled their payment, but as it is processing over a holiday, it’s not expected to be processed and re-deposited until the 8th. My partner now wants to begin the eviction process in the event they try to revoke that payment too and our paperwork at the bank turns out to be useless.

This tenant has no reason to not pay based on any service requests, as I’ve always resolved issues same day.

Just never dreamed I’d need to worry about rent AFTER it’s in my account and one it’s way out the door to pay the mortgage.

Are you charging them a late fee since the payment was not received as required by the lease?

I’d be tempted to place a eviction notice on the door and if they ask just clearly state it is company policy. That way it’s the rule it isn’t you making a decision. Just you following the rules.

OP

Member since 2018 · 156 posts · 106 votes

7y

@Eric C. They have been charged a return payment fee as stipulated in their lease. On the 5th (Texas) we will begin charging late fees. I’m reading up on Texas law currently to see when and if I should post notice. They have rescheduled their payment, but it will still be considered late if it goes through, as it will not deposit until the 8th. My husband would like to post notice tomorrow to get the ball rolling in the event things go south.

5 Reply

OP

Member since 2018 · 156 posts · 106 votes

7y

@Eric C. And yes, absolutely, we are very much “company policy” driven, and will uphold the lease to the letter

OP

Member since 2018 · 156 posts · 106 votes

7y

@Joe Splitrock I did tell the tenant they now need to pay this month in a cashiers check, however because they rescheduled their payment through Cozy already, they are claiming the money already left their account; which is totally possible, however it won’t hit mine until the 8th. My husband spoke with our bank this morning and complained that Cozy did not have his authorization for the withdraw, and so now they have credited the account back. I’m worried this was the wrong move, as the waters now seem muddy with a second payment pending in Cozy, our bank floating the withdrawn money, and Cozy I assume being charged for that reversal from our bank; especially in relation to eviction.

Sylvia B.

Rental Property Investor · Douglas County, MO · Member since 2014 · 1k+ posts · 1k+ votes

7y

Originally posted by @Joe Splitrock:

Originally posted by @Dennis M.:

Another reason why I prefer being paid by uncle Ben

He never jumped out of my pocket

Of course with cash you have to worry about fake bills and robbery. Not to mention the hassle of handling it. I love electronic payment for the hands off aspect. But certain tenant types I would accept nothing but cash. Just depends on who you are dealing with. Well screened tenants in B class properties will never be an issue no matter what pay method.

We received a thick envelope in the mail today from a tenant - their rent payment in cash! It's an older lady, and I'm trying to convince her to use her bank's billpay system.

Margaret Johnson

Member since 2018 · 43 posts · 32 votes

7y

It sounds to me like the tenant miscalculated or overspent on something else and tried to make up for the shortage in funds by marking that payment as fraud. It seems like it should be a crime to falsely report fraud like that.

Mike S.

Rental Property Investor · Huntsville, AL · Member since 2013 · 419 posts · 323 votes

7y

Originally posted by @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.

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.

Cash App is unlimited receipt once you verify your account. Zelle is pretty strict and I was never able to get it to raise limits enough for me to receive even a single payment.

Bryan Devitt

Contractor · Oxford, MA · Member since 2018 · 807 posts · 745 votes

7y

@Alyssa K. Definitely get everything going for eviction. Even if you don't have to go through with it, it shows the tenant that you're not messing around. As to the double payment and muddy waters, not your problem. They'll double charge the tenant and they can figure it out. As far as you knew they were paying next month early.

Matthew Olszak

Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes

7y

Originally posted by @Alyssa K.:

@Joe Splitrock I did tell the tenant they now need to pay this month in a cashiers check, however because they rescheduled their payment through Cozy already, they are claiming the money already left their account; which is totally possible, however it won’t hit mine until the 8th. My husband spoke with our bank this morning and complained that Cozy did not have his authorization for the withdraw, and so now they have credited the account back. I’m worried this was the wrong move, as the waters now seem muddy with a second payment pending in Cozy, our bank floating the withdrawn money, and Cozy I assume being charged for that reversal from our bank; especially in relation to eviction.

That was a bad move, because now the $ is going to be withdrawn from Cozy's account likely as fraud, just as your tenant did to them. You likely did authorize Cozy to withdraw the money for any reversed transaction as part of their user agreement (the checkbox everyone checks but nobody reads). I'd expect your Cozy account to be closed if that goes through.

I went through the something similar with paypal back in the day when I was selling on Ebay. Buyer tells them the item doesn't match the description or something similar, paypal pulls the $ from my account to refund them.