Cozy allowed payment reversal that withdrew previously paid rent

Cozy allowed payment reversal that withdrew previously paid rent

Member since 2018 · 156 posts · 106 votes

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?

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Joe SplitrockPro Member
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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.

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  • Member since 2018 · 156 posts · 106 votes
    7y

    @Matthew Olszak I thought the same and contacted both Cozy and my bank to remedy the situation. Cozy is accepting responsibility as it turns out there was a glitch in their system that caused payments missed due to insufficient funds to report to the landlord as fraudulent causing unnecessary panic from several landlords, myself included. Apparently when you have express pay Cozy floats the tenants rent while they wait for it to be received, when it wasn’t, they reclaimed the money they floated. Still dealing with unpaid rent, but all is well with Cozy and my bank.

  • Rental Property Investor · Los Angeles · Member since 2019 · 284 posts · 184 votes
    7y
    Originally posted by @Mike S.:

    I've been transitioning my rentals to use Cash App.  It's a cash payment, no reversals, instant transfer to your Cash App account.  Cashing out to your bank account can take 2 days, but my experience is it's 1 day.  They can either download the app or use a unique url to pay online. 

     Do you know if theres a $$ amount limit on for each payment transfer on Cash App?   I have property that is being rented for $4200.... some apps have max and payments need to be split.  

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Bryan Devitt that is the plan, however I’m having a heck of a time finding any hard and fast rules about dates in regards to starting the eviction process. I’d like to give a proposed notice to vacate, and if payment is not received by X days, follow through with an actual notice to vacate. But the laws don’t appear to spell out timelines other than they need to have received notice 3 days prior to my filing a forcible detainer. Their new payment is already pending, and after talking to the renter I don’t think I’ll have an issue with it posting, however as it will be a week late by the time it switches from pending to posted, I still want to make sure I take the necessary steps to follow the letter of the law, protect my asset, and deter them from allowing this to happen again.

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Joe Splitrock turns out Cozy made an error and reported their failed payment, due to insufficient funds, to me as they had claimed fraud/disputed with their bank. Still dealing with not having rent in hand, but feel much better knowing they didn’t maliciously report their payment as fraud to buy themselves another week.

  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    7y

    @Greg H. knows a thing or two about Texas. Greg, when can a landlord post an eviction notice in TX?

    Assuming nothing in the lease states otherwise and the lease follows a TAR format, rent is considered late after the 1st and a landlord can post the 3 day notice to begin the eviction process on the 2nd irregardless of any grace period in the lease.  

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Mindy Jensen thank you! @Greg H. I’d love to hear any insights you have to offer! Currently in the first lease, with my first two tenants, in my first two rentals, so absolutely still learning!

  • Real Estate Broker · Member since 2018 · 18 posts · 6 votes
    7y

    @Alyssa K. Why not PayPal or Venmo?

  • Rental Property Investor · The Vampire State · Member since 2013 · 2k+ posts · 2k+ votes
    7y

    I have my tenants deposit everything into my predesignated back account.  They can ACH it, walk in to a branch with cash or a personal check, etc.

    I know a lot of people find these third party vendors convenient, but to me it just puts another link in the chain between the tenant's payment and my revenue.  And in this particular case, the vendor screwed up, which caused problems for both you and your tenant.

  • Rental Property Investor · Conyers, GA · Member since 2017 · 51 posts · 14 votes
    7y

    @Lee Falkenhagen

    @Alyssa K.

    I have used Venmo with 2 of my tenants with zero issues. I would then transfer money from Venmo to my bank for free, which takes a few days. Only issue is that Venmo cannot schedule payments. Also, the tenant has to initiate the transfers. So I got a few payments right before the 5th of the month, and I had to remind them a few times about the late fee.

    I just got my latest tenant to use Cozy. They use the ACH auto payment. No issues, they just moved in May.

  • Rental Property Investor · Springfield, MO · Member since 2013 · 109 posts · 92 votes
    7y

    @Alyssa K. I do not use online payments because of this issue. I have my tenants deposit their payments directly into a special deposit account each month at the bank Drive-through window.

    Or they can set up an automatic payment each month with their own bank to send money to same account .

    Or, thirdly, they can set up an account at same bank and simply transfer money into my deposit account each month.

  • Rental Property Investor · Springfield, MO · Member since 2013 · 109 posts · 92 votes
    7y

    @Lee Falkenhagen I have had PayPal do the same thing and withdraw money that was paid when a payer “disputed” it.

  • Rental Property Investor · Cape Coral, FL · Member since 2015 · 206 posts · 83 votes
    7y

    @Alyssa K. Apologies if you already stated this...how long did it take to reverse from your account from when you received the email? I just had this happen with a security deposit that the tenant decided right before the lease signing she didn't like the commute.

    I'm withholding a pro rated rent amount for the time the property was held and an admin fee for getting her set up with all the documents and managment software. I received the email this morning @ 3am EST but I did delete my checking account from cozy yesterday (after reading your post) as my other rentals are on a different software. So far nothing has hit my back account for reversal.

  • Rental Property Investor · Savage, MN · Member since 2016 · 202 posts · 61 votes
    7y

    Great to know as I too use Cozy for rent collection and have had no issues such as this (as of yet). 

    thank you for sharing!

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Chris Virgil-Stone about 24 hours

  • Rental Property Investor · Atlanta, GA · Member since 2016 · 325 posts · 253 votes
    7y

    @Alyssa K. I have been using Cash App and Zelle now for over three years and like the instant receipt of the payment. I have not used Cozy since other two are free and secure.

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Alexander Lang This was the first issue I’ve had with them, otherwise Cozy has made managing my own properties really simple.

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Al Pat thank you! I plan to look into these.

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Lee Falkenhagen no particular reason other than Cozy was recommend to me here on BP, and offers me the ability to complete more steps of my process than a straight money exchange program would (background/credit check, rest analysis/estimator, offers the tenant the ability to make service requests etc.). I’ve been very happy with Cozy, this situation just took me aback because I didn’t know it was possible for them to withdraw funds that had already been deposited. From what others have said, it sounds like this is a potential risk with any ach transfer.

  • Fort Lauderdale, FL · Member since 2016 · 214 posts · 95 votes
    7y
    Originally posted by @Lee Falkenhagen:

    @Alyssa K. Why not PayPal or Venmo?

    PayPal is just as susceptible to this.  Currently I am fighting with a webhosting client that would have been their 4th year.  Wife didn't recognize the charge 60 days after it was collected, they disputed it, now they're refusing to re-pay.

    PayPal opened a dispute before reversing the funds.  I provided email communications between the client & myself, screenshots of the prior 3 years hosting, screenshots of the Domain Registration in the clients name, & the website being online.  15 days later, they pulled the funds, 30 days later, they closed the investigation.  When the reversal comes from the Credit Card company, from my experience PayPal offers the seller no protection.

  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    7y

    Paypal allows the sender to dispute the transfer, and could have a similar result. Venmo does not allow for dispute, they just tell you to request the funds back from the person you sent them to.

  • Rental Property Investor · Cape Coral, FL · Member since 2015 · 206 posts · 83 votes
    7y

    @Alyssa K. Thank you for the quick reply!

  • Investor · Navarre, FL · Member since 2016 · 18 posts · 2 votes
    7y

    @Alyssa K. I’ve been using Cozy for 5 years and never personally experienced this. This is the first post I’ve ever seen that Cozy returned a payment. This does cause some concern, please respond back when you rectify the situation as I am very curious how this situation plays out.

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Chris Virgil-Stone absolutely! Hope you are able to get everything resolved quickly!

  • Member since 2018 · 156 posts · 106 votes
    7y

    @Jose Torres it was reported by Cozy as fraud in error, the tenant had insufficient funds. Her paycheck hadn’t finished clearing when Cozy withdrew rent from her bank. Apparently if you have express pay Cozy floats the tenants rent on the 3rd day if a payment has been made but has not yet been processed (or kicked back). When the payment finishes processing they pay themselves back. Because her payment didn’t clear, they withdrew the funds they floated/deposited into my account. She has scheduled another payment, but because of her bounced “check”, Cozy took her off express pay for this next payment.

  • Rental Property Investor · San Jose, CA · Member since 2018 · 152 posts · 159 votes
    7y

    @Alyssa K. That has got to be frustrating. My experience with Cozy has been great so far, I couldn’t imagine dealing with checks and cash every month at this point.

    This type of service has helped make my rentals even more “passive”. However, if I did experience something like that more than once I would definitely consider a switch.

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