{"id":5277,"date":"2020-03-10T10:30:44","date_gmt":"2020-03-10T17:30:44","guid":{"rendered":"https:\/\/www.rentecdirect.com\/blog\/?p=5277"},"modified":"2020-03-10T16:06:53","modified_gmt":"2020-03-10T23:06:53","slug":"rental-application-chargebacks","status":"publish","type":"post","link":"https:\/\/www.rentecdirect.com\/blog\/rental-application-chargebacks\/","title":{"rendered":"How To Deal With Rental Application Chargebacks"},"content":{"rendered":"

\"rental<\/p>\n

Online rental applications<\/span><\/a> are becoming commonplace these days, and often well-received by landlords and property managers who benefit from the efficiency of automating the leasing process. <\/span><\/p>\n

One of the drawbacks of online rental applications, however, is the possibility of a tenant or rental applicant issuing a chargeback for the application fee.\u00a0<\/span><\/p>\n

What is a Chargeback?<\/h2>\n

Under the Fair Credit Billing Act<\/a> (FCBA), consumers have the right to dispute charges they believe have been made in error on their credit card, this dispute is known as a chargeback.<\/p>\n

According to Credit Karma<\/a>, “A chargeback is a dispute of a purchase that has already been charged to an account that can result in a return of funds.”<\/p>\n

Chargeback for Rental Application Fee\u00a0\u00a0<\/span><\/h2>\n

For landlords and property managers, a rental application chargeback happens when an applicant pretends he never authorized payment for an online rental application, disputes it with his credit card company, the credit card company complies and cancels the payment to you. The landlord or property manager ends up with a canceled payment and sometimes additional fees from <\/span>his <\/span><\/i>bank or merchant.<\/span><\/p>\n

This is the same headache you may deal with when an applicant’s check bounces and unfortunately, just how works in the credit card world. \u00a0Fortunately, the chances of it happening are extremely low. \u00a0<\/span><\/p>\n

According to real user data from 2015, Rentec Direct landlords accepted over 50,000 online applications and less than a dozen of those have resulted in a chargeback. \u00a0That’s only 0.024% of applicants (or 1 in every 4000) that issued a chargeback.<\/span><\/p>\n

\"\"<\/p>\n

Despite it being a low percentage, there is the occasional confused or disgruntled applicant who is upset about being rejected. \u00a0They might feel the best way to get back at you for rejecting their application is to issue a chargeback. \u00a0I just assisted one of our clients with this today, and it can feel frustrating because as we all know (or maybe not), the banks will always initially side with the cardholder, never the merchant.<\/span><\/p>\n

Here’s how a typical application fee chargeback happens.<\/h2>\n
    \n
  1. The applicant applies for your property online and pays the application fee (typically $20 – $50 per person).<\/span><\/li>\n
  2. During your review process, you probably order credit and criminal tenant screening reports<\/a> on the applicant.\u00a0<\/span><\/li>\n
  3. During your review of the applicant’s data, they do not meet your requirements, and you reject their rental application<\/a>.<\/span><\/li>\n
  4. Sometime within the next 60 days, the applicant gets their credit card statement and they feel they might be able to “stick it” to the property manager by charging back the fee. \u00a0After-all, they might have done this before with other merchants when they felt they didn’t get the product or service they wanted. \u00a0In this case, what they wanted was to rent from you, and they didn’t get what they wanted.<\/span><\/li>\n
  5. Also note, some chargebacks are accidental. \u00a0Read more about this below.<\/span><\/i><\/li>\n
  6. The cardholder’s bank will immediately pull the funds out of your account and give them back to the cardholder (the applicant). \u00a0The cardholder also issues a “chargeback fee” for handling the request to the merchant. \u00a0Unfortunately, even though you are right and the cardholder is wrong, this is just the way accepting credit cards works and this is how it works with all merchants. \u00a0[This is just like a bounced check fee that your bank imposes if you deposit a NSF check.]<\/span><\/li>\n
  7. If you have your own merchant account, your merchant provider will notify you that the cardholder issued a chargeback. \u00a0If you use <\/span>Rentec\u2019s EasyPay service<\/span><\/a> without a merchant account, we will get notified and pass along the message to you.<\/span><\/li>\n<\/ol>\n

    How to handle rental application chargebacks.<\/h2>\n

    The credit card companies allow the cardholder’s bank (the issuing bank) significant flexibility and authority in determining whether a transaction is valid. \u00a0Because the cardholder is the bank’s customer, it’s not uncommon to see the cardholder’s bank side with their customer rather than the merchant in many cases. \u00a0This is especially common in “card not present” or “signature not present” situations, which is the case for all e-commerce and electronic rental applications. \u00a0<\/span><\/p>\n

    The good news is that you are legally owed the money and the law is on your side, even if the credit card companies are not. \u00a0Here are some options:<\/span><\/p>\n

    Option 1 – Challenge the dispute.<\/h2>\n

    If you have your own merchant account, you are given the option by your merchant provider to dispute the cardholder’s claim. \u00a0You can provide evidence that the transaction is legitimate and the cardholder owes it to you. \u00a0It is up to the issuing bank (the cardholder’s bank) to determine if you supplied enough evidence to warrant a reversal of those funds back to you. \u00a0You’ve already paid a “chargeback fee”, and your merchant provider may charge you a 2nd fee to initiate the dispute so be sure to consult your merchant provider first. \u00a0<\/span><\/p>\n

    If you dispute the claim, here is what we recommend you supply:<\/span><\/p>\n