Landlords using eRentPayment missing rent checks
Intermediary bankruptcy causes some landlords to reports tens of thousands of dollars in rental payments taken from tenants but not received.
(Usual disclaimer: I'm just an investor and not a financial advisor or attorney. Consult your own financial professional before making any financial decisions).
This is for those readers directly invest in residential real estate properties like I do. eRentPayment is one of the most popular services used by landlords to automatically deduct rent payments from tenant bank accounts. Normally, using this type of service is awesome. An ACH can be much safer than trying to collect the check, since it can't bounce and you don't have to wait a week for it to clear. And it's also a huge time-saver, because the tenant does everything online, so you or your property management company doesn't have to personally visit them, or process checks, etc.. However, recent events show that they aren't foolproof either. Recently, eRentPayment's payment processor (eCheckit) went bankrupt. As a result, it took tenant rental payments from their bank accounts in early October, but never gave the money to eRentPayment and their landlord customers. And it could be years before a bankruptcy gets resolved and the money returned to the landlords (if ever). Some investors are reporting they are missing tens of thousands of dollars of rental payments.
The only alternative is to try to get the tenant to dispute the ACH with their bank. eRentPayment has come up with a template for this purpose. At this point, investors are reporting mixed success. Some banks are doing the refunds, and others are pushing back. As this all plays out, some investors are feeling the heat. In my case, I'm thankful that my properties have no debt (part of my recession hardening strategy). So while this it's painful, it won't be fatal. But the vast majority of investors leverage their properties to the max. If cash flow is already squeezed, a month's worth of missing rental payments could be disastrous. To add insult to injury: some investors are alleging that eRentPayment has not agreed to refund their $3 ACH fee, on the botched transactions.