Cozy allowed payment reversal that withdrew previously paid rent

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Cozy allowed payment reversal that withdrew previously paid rent

Alyssa K.
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
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.

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  • Mike S.
    Rental Property Investor · Huntsville, AL · Member since 2013 · 419 posts · 323 votes
    7y
    Originally posted by @Casey Powers:
    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. 

    If it's an online payment of any kind, it can be disputed and reversed. There is no such thing as a "non-reversible" electronic payment.

    To answer the question in general, it doesn't matter how the payment is being sent, or which payment processing company / app / website you use: if the payment is disputed, it can (and almost always will) be reversed. This is true for rent payments as well as any payment for service or merchandise. The merchant (or landlord) almost always loses when someone disputes a charge with their bank. 

     Cash App to the tenant is a debit card payment. It’s a higher hurdle than a credit card charge back and much higher than ACH. It won’t be a 1 minute phone call with nothing other than a disgruntled tenant to reverse the charge. Actual fraud has to have taken place and if that’s the case, the landlord has other issues to worry about. 

    Cash App is acting as an agent transferring between two parties(the banks), as such, is a cash transaction. It will be near impossible to charge back. Heck, I can opt for bitcoin and not even involve my bank in the transaction. 

    0Reply
  • Casey Powers
    Las Vegas, NV · Member since 2018 · 405 posts · 474 votes
    7y
    Originally posted by @Mike S.:
    Originally posted by @Casey Powers:
    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. 

    If it's an online payment of any kind, it can be disputed and reversed. There is no such thing as a "non-reversible" electronic payment.

    To answer the question in general, it doesn't matter how the payment is being sent, or which payment processing company / app / website you use: if the payment is disputed, it can (and almost always will) be reversed. This is true for rent payments as well as any payment for service or merchandise. The merchant (or landlord) almost always loses when someone disputes a charge with their bank. 

     Cash App to the tenant is a debit card payment. It’s a higher hurdle than a credit card charge back and much higher than ACH. It won’t be a 1 minute phone call with nothing other than a disgruntled tenant to reverse the charge. Actual fraud has to have taken place and if that’s the case, the landlord has other issues to worry about. 

    Cash App is acting as an agent transferring between two parties(the banks), as such, is a cash transaction. It will be near impossible to charge back. Heck, I can opt for bitcoin and not even involve my bank in the transaction. 

    Doesn't matter. If someone wants to take the money back, they will do it. Any electronic payment can be reversed.

    0Reply
  • Mike S.
    Rental Property Investor · Huntsville, AL · Member since 2013 · 419 posts · 323 votes
    7y
    Originally posted by @Casey Powers:
    Originally posted by @Mike S.:
    Originally posted by @Casey Powers:
    Originally posted by @Mike S.:

    Doesn't matter. If someone wants to take the money back, they will do it. Any electronic payment can be reversed.

    Well, this is the internet, and by golly you can believe in boogie men if you want  

    0Reply
  • Casey Powers
    Las Vegas, NV · Member since 2018 · 405 posts · 474 votes
    7y

    It's not the boogieman. I know someone who lost a whole year of rents after the tenant disputed that far back. The bank just reached into their account and took the money for the most recent 6 months, then took the other half later. They can do it on any electronic payment. If you think it can't happen to you, think again. It can.

    1Reply
  • Mike S.
    Rental Property Investor · Huntsville, AL · Member since 2013 · 419 posts · 323 votes
    7y
    Originally posted by @Casey Powers:

    It's not the boogieman. I know someone who lost a whole year of rents after the tenant disputed that far back. The bank just reached into their account and took the money for the most recent 6 months, then took the other half later. They can do it on any electronic payment. If you think it can't happen to you, think again. It can.

     You’re either conflating a different payment method than credit/debit(like giving direct non third party ACH access to your tenant to your account) or talking about a fraudulent situation with a judgement or you or your “someone” is being less than honest. A lie told in ignorance is still a lie. 

    The Electronic Funds Transfer Act limits liability to 60 days( some credit cards allow 90 days). You’re not going to get a years worth of payments without a judgment. 

    0Reply
  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    7y
    Originally posted by @Casey Powers:
    Originally posted by @Mike S.:
    Originally posted by @Casey Powers:
    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. 

    If it's an online payment of any kind, it can be disputed and reversed. There is no such thing as a "non-reversible" electronic payment.

    To answer the question in general, it doesn't matter how the payment is being sent, or which payment processing company / app / website you use: if the payment is disputed, it can (and almost always will) be reversed. This is true for rent payments as well as any payment for service or merchandise. The merchant (or landlord) almost always loses when someone disputes a charge with their bank. 

     Cash App to the tenant is a debit card payment. It’s a higher hurdle than a credit card charge back and much higher than ACH. It won’t be a 1 minute phone call with nothing other than a disgruntled tenant to reverse the charge. Actual fraud has to have taken place and if that’s the case, the landlord has other issues to worry about. 

    Cash App is acting as an agent transferring between two parties(the banks), as such, is a cash transaction. It will be near impossible to charge back. Heck, I can opt for bitcoin and not even involve my bank in the transaction. 

    Doesn't matter. If someone wants to take the money back, they will do it. Any electronic payment can be reversed.

    Any sort of ACH, check, credit or debit transaction can be reversed fairly easily. You can even reverse payments going back months. Of course the further you go back, the more difficult and more supporting proof that is needed.

    However, there are electronic payment options that are very difficult to reverse. Zelle for example will only reverse if you can prove your account was hacked. Even if you state the goods and services were not received, they will not reverse. My understanding is that Venmo and Cash App are also very difficult to reverse. All these services are billed as being more like cash and lack fraud protection in the even of goods/services not being delivered as promised. 

    1Reply
  • Casey Powers
    Las Vegas, NV · Member since 2018 · 405 posts · 474 votes
    7y
    Originally posted by @Mike S.:
    Originally posted by @Casey Powers:

    It's not the boogieman. I know someone who lost a whole year of rents after the tenant disputed that far back. The bank just reached into their account and took the money for the most recent 6 months, then took the other half later. They can do it on any electronic payment. If you think it can't happen to you, think again. It can.

     You’re either conflating a different payment method than credit/debit(like giving direct non third party ACH access to your tenant to your account) or talking about a fraudulent situation with a judgement or you or your “someone” is being less than honest. A lie told in ignorance is still a lie. 

    The Electronic Funds Transfer Act limits liability to 60 days( some credit cards allow 90 days). You’re not going to get a years worth of payments without a judgment. 

    Sorry, you can keep arguing if you want. Every type of electronic payment can be reversed, whether you want to believe it or not. It happens. 

    0Reply
  • Kenny Dahill
    Investor · Tempe, AZ · Member since 2018 · 1k+ posts · 731 votes
    7y

    @Mike S. I recently notified my bank of a credit card charge that I did not recognized back in April.  So I reported it as fraud.  3 days later I got a message from the eBay vendor I purchased from expressing his frustration that I reversed the charge.  I informed the bank of my mistake and he got repaid.

    Point being as @Casey Powers stated, electronic payments can be reversed outside of the 60 day window.

    1Reply
  • Rob B.
    Chicago, IL · Member since 2018 · 546 posts · 227 votes
    7y

    Sometimes payment issues can happen, especially with fraudulent activity becoming more and more rampant; having said that, there are definitely other resources out there that might make more sense for your rental business. It could be worth considering a shot at an actual software solution built for DIY landlords (1 - 15 units); one that helps you to automate your own rental process (ie. compared to other tools, one that helps you to actually get it listed on 10+ major listing sites, allows you to schedule showings, provides you with super thorough tenant screening options, online digital leases which can be customized and help you by breaking out those fees, automated maintenance tracking, and fast rent collection which also offers your tenants the ability to report their positive on-time payments to the major credit bureaus; just another positive reinforcement/added incentive to get them to make those payments on time). More than happy to answer any questions that you might have about online rent collection options! @Alyssa K.

    0Reply
  • Matt B.
    Member since 2020 · 2 posts · 0 votes
    6y

    I just got a fraud payment reversal for 2 months of rent payments! So it's not just during the "float" period, apparently, tenants can dispute any rent payment from any time and Cozy will immediately remove the funds from your account. This seems like outright fraud or theft! How can they remove rent from my account that was paid 2 months ago on a legitimate tenancy with a lease in place? I'm thinking about canceling all my Cozy rent collection. Anyone else experience anything like that where a tenant disputes charges from previous months?

    0Reply
  • Gary Abner
    Rental Property Investor · Kitsap county Washington · Member since 2017 · 117 posts · 39 votes
    5y
    Originally posted by @Alyssa K.:

    @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.

    How were you able to determine this?

    i also recieved a similar fraud payment reversal email today.

    thank you.

    Gary

    0Reply
  • Alyssa K.
    OP
    Member since 2018 · 156 posts · 106 votes
    5y

    @Gary Abner

    Because the alert I received from Cozy said “fraudulent”, and the tenant was telling me it was due to the insufficient funds, I had her reach out to both her bank and Cozy and ask they provide me with written statements of what had transpired on both ends. The bank confirmed it was due to insufficient funds, and Cozy confirmed it was their error in marking as “fraudulent” rather than “insufficient”. The tenant rescheduled payment, as well as late fees/bounced payment fees, and I have thankfully not had any further issues with Cozy.

    0Reply
  • Jeremy Corporan
    Rental Property Investor · Haledon, NJ · Member since 2019 · 26 posts · 6 votes
    2y

    @Karl B.

    0Reply
  • Account Closed
    Rental Property Investor · Calumet City · Member since 2024 · 13 posts · 3 votes
    2y
    Quote from @Karl B.:

    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. 


     This has recently happened to me and regardless when they remove the money from the account such as with nsf or fraud dispute you still get ding with a merchant fee and dispute charges

    0Reply
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