The federal moratorium on evictions is set to expire January 31st, putting millions of American households at risk. Evictions also pose enormous challenges for landlords and property management companies, or PMCs.
As of January 2021, it’s estimated U.S. tenants could owe as much as $70 billion in back-rent, according to Moody’s Analytics, and potentially thousands of renters who paid by credit card may turn to chargebacks out of desperation to recoup funds. Additionally, financially distressed residents may be more likely to make late payments or only make partial payments potentially exacerbating an already insecure cashflow. Here are a few approaches to better manage financial risk for PMCs:
Automating Risk Management
Activating options such as automated payment logic may help secure cash flow in these uncertain times. Applying settings such as the ability to automatically accept or reject partial payments, or to require certified funds for late payments are just a few examples of how this can work to help mitigate financial risk.
Protection from Chargebacks
Nearly thirty percent of residents paid with a credit card during the pandemic — a dramatic increase since 2019. Twelve percent of those renters didn’t have other funds or payment methods available. In addition to financial difficulties, waived credit card fees and elimination of in-person cash and check deposits contributed to the rise in card payments. Accepting credit cards isn’t inherently bad for property operators — and can help renters who may be otherwise unable to stay afloat — but it does open property managers to increased risk if they are not prepared.
U.S. merchants were predicted to suffer over $33 billion in credit card fraud losses in 2020, but that number has likely been surpassed. For PMCs, fraud comes in the form of chargebacks on application fees (most common) or potentially rent — when current or former residents dispute rent charges with their banks.
Increased credit card usage, coupled with a surge of evictions, may result in more chargebacks for property management companies in 2021. Though they’re rare, just a few chargebacks can lead to significant revenue loss, as well as a lengthy appeals process for billing departments and property managers. Renters have 120 days to chargeback a payment on a credit card. This translates to roughly 4 months worth of rent. When this chargeback is made the funds are immediately withdrawn from the property’s operating account and not restored unless that PMC provides adequate proof that the charge was legitimate.
Rent payment platforms like Domuso can help mitigate chargeback risks through the chargeback protection provided on payments made with digital certified funds. This means that a resident can make a rent payment with their regular credit card -- but if set up with Domuso, credit card payments are always received as certified funds. This proprietary payment option that can also be used with e-check or ACH payments, provides the same security as cash-equivalent payments like cashier’s checks or money orders, while minimizing in-person contact and helping PMCs process payments more efficiently.
When digital certified funds are used the property is given full 100% chargeback protection and does not need to manage an appeal or have to risk funds being removed from their accounts even if a chargeback is made. Properties are able to circumvent the entire administrative process without spending valuable time and money on disputes.
Talk to us today about how Domuso can help you manage financial risk and eliminate chargebacks in 2021.