Easing The Burden of Chargebacks in Multifamily

When incurring chargebacks on credit cards, multifamily properties need the most proven expertise possible. The fact is, chargebacks come in all shapes and sizes and can be complex to navigate when a rent payment is disputed. Understanding what credit card companies look for when determining if a chargeback is warranted isn’t always that easy.

In multifamily, chargebacks are not uncommon and can be a stumbling block in getting paid for rent and other services. Regulations favor consumers who dispute a credit card charge and essentially put the onus on the property to prove the chargeback is not warranted.

Regulation Z of the Truth in Lending Act allows consumers no-questions-asked reversal rights to negate illegal charges. Some leverage the regulation to buy time for paying bills, even though they have no real intentions of walking away from the charge. This can be particularly frustrating for properties at rent payment time.

 A resident with an empty checking account may pay rent or property services on time with a credit card only to dispute the transaction a couple of weeks later. For at least two weeks, the account is current, until the credit card company kicks back the charge because the resident claims the charge wasn’t theirs. The charge is removed from the property’s merchant account, and site staff are then faced with uncomfortable task of confronting the resident and proving the transaction should stand.

Welcome to friendly apartment fraud, which can take on many forms – some of which can be pretty strange, says RealPage SVP Nancy Morlini.

“With zero fraud liability, we’ve seen residents who say they lost their card and that somebody paid rent for them with it,” she says with a laugh. “A property manager basically has to take the consumer’s word for it. Friendly fraud is consumers leveraging the system to their advantage.”

Others are bolder and simply make charges they don’t intend to pay. At move-out, a renter may pay for fees related to damage but request a chargeback from the credit card company a few weeks later. The payment processor removes the money from the property’s account because it is disputed, and the apartment must defend itself.

Meanwhile the renter is long gone.

Either way, the multifamily property must have its facts straight to prove to the credit card company that the original charge was legitimate so the funds can be returned to the property manager’s account.

Stepping in on rental payments

While chargebacks have been on the rise globally, the pandemic has quickened the pace. Friendly fraud is expected to represent 61% of all chargebacks in North America by 2023. Global chargeback volume will reach $615 million in 2021, according to MasterCard.

RealPage has identified about 20 types of chargebacks that affect multifamily – everything from friendly fraud, to processing errors, to disputes over non-receipt of goods or services.

Properties that aren’t well-versed in defending against chargebacks may spend unproductive time and resources making a case – and typically lose, Morlini says. Usually they provide the credit card company with lease agreements, credit information and anything else they can think of to dispute the chargeback.

In the meantime, the money removed from their bank account and at risk of being lost if the renter wins the dispute.

Sometimes, the rental property just surrenders.

“They are not trying to win because it’s not worth the operational expense and they don’t have the expertise,” says Morlini. “Clients get frustrated that they invest many hours trying to collect all this data to prove that it’s a legitimate charge and don’t end up winning because proper steps were not taken somewhere along the way.”

That’s when RealPage Payments steps in to handle the chargeback process.

Making a case against chargebacks

With a deep bench of chargeback professionals having over 25 years of experience, RealPage Payments is proven at winning cases against chargebacks for clients who employ the company’s payment services. The value-add service reduces the chances that apartment properties lose chargebacks that otherwise might be written off and create uncomfortable moments with residents.

According to the latest data, the chargeback rate in multifamily is around 3%, but RealPage’s rate is 0.33% or a third of a percent.  On average, RealPage wins back over 50% of chargeback claims.

Morlini says it’s important that property managers understand that chargebacks don’t necessarily mean the property is out of the money when a renter disputes a charge. The transaction ultimately gets posted to the renter’s ledger which often results in a future collection of the funds owed.

In the meantime, RealPage Payments goes to work to defend against the chargeback and take pressure off the site staff. In doing so, RealPage leverages the industry’s apartment transaction data and looks at the consumer’s payment history and behavior to build the case.

Along the way, those uncomfortable moments between the property and resident are at least temporarily placed on hold.

Leaning on the financial experts

As fraud cases continue to rise, chargebacks will continue to be a thorn in multifamily’s side. The playing field is ever changing and it makes sense to lean on the experts.

Morlini says that property managers can gain a big advantage in the chargeback fight by entrusting RealPage to handle the nitty gritty.

“The rules are always changing – there’s no way a site can keep up,” Morlini says. “And it takes them out of that uncomfortable engagement with their residents and lets us handle it on their behalf.”

Fraud and payment security are concerns for multifamily operators of all sizes. RealPage has the solution to protect you against costly chargebacks and lost rent payments. For more, visit Realpage Payments.