Propertyware Knowledge Base

Important Information on the Use of Convenience Fees


There are some specific Credit Card Company rules related to convenience fees that you need to be aware of.

• Convenience fees charged on credit card transactions must be “applicable to all forms of payment accepted in the alternative payment channel.” This means that if a resident has a choice between paying by credit card or paying by ACH, the convenience fee charged for credit card payment cannot be different from or higher than the convenience fee charged for paying by ACH.

• Convenience fees cannot be added to automatic/recurring credit card payments.  Additionally, if you accept credit cards for any type of tenant payment, you cannot add a convenience fee to automatic/recurring payments made by ACH. If you do not accept credit cards for any type of tenant payment, Credit Card Company rules do not apply to convenience fees for ACH payments.

• Convenience fees cannot be added to any payments made using American Express cards.

Credit Card Companies are stepping up their efforts to identify companies that violate their rules. Violators can face suspension or termination of their credit card processing services, as well as substantial fines.

New federal legislation, introduced last year in the Durbin Amendment to the Consumer Financial Protection Act of 2010, initially appeared to have the potential to alter many of these types of restrictions by Credit Card Companies. However, enactment of that legislation does not appear to be forthcoming soon.

As a result, in order to protect our clients and business partners, Propertyware is taking steps to comply with Credit Card Company rules.  Depending on your company’s convenience fee policies, you may also need to take action.


Effective January 19, 2012, the following changes will be made to your Propertyware application:

• Your ePayments setup will only allow the establishment of a single convenience fee that can be applied to tenant payments originated online, whether they are made by credit card or ACH. If you accept credit cards for one-time or recurring rent payments, the convenience fee will be applicable to both ACH payments and credit card payments.  If, on January 19, 2012, you have not modified your settings so that both convenience fees are the same, your settings will default to charging the lower fee you have currently set up for both types of transactions.

• If your ePayments setup allows tenants to make one-time or automatic payments with credit cards, the convenience fee you have set up, if any, will no longer be added to automatic payments made with either ACH or credit cards. If your setup does not allow Tenants to make any payments with credit cards, your convenience fees, if any, will continue to be added to automatic payments made with ACH.
• If your business accepts American Express Cards, any tenant payment made using an American Express card will not have a convenience fee added to it. We will be making a change to our portal which will require tenants to specify which type of credit card they are using.

• Re-examine your policy on accepting credit card payments. You may wish to limit or cease accepting credit cards for certain type of payments. You may wish to not accept credit cards for auto payments to limit exposure to transactional fees that can’t be recouped with a convenience fee. 
  
  
• If you accept credit cards for Tenant Payments, and you do not want to absorb transactional fees from auto ACH payments, you will have a new option to not allow ACH auto payments after January 19, 2012.


• If you wish to cease to accept American Express cards, please contact Propertyware support – and, of course, notify your tenants.

• If you will continue to accept credit cards for tenant payments, determine the single convenience fee you will charge for online payments made through ACH or credit cards.

• Communicate the date these changes will take effect to your residents. Your effective date must be prior to the week of January 19, 2012.

• On your effective date:
  
  
  1. Change your settings related to the conditions under which you accept credit cards, if applicable. 
  
  
  2. If applicable, in your ePayments settings in Propertyware, make your convenience fees for ACH and credit card payments an identical amount.  Also, make any other applicable setting changes you wish to establish, such as setting amount limits for credit card payments, ceasing to accept credit card payments for recurring/auto-payments, etc.  After January 19, 2012, there will only be one convenience fee amount in ePayments settings.
  
  
  3. If you have varied convenience fees in the “Portfolio Exceptions” area of Propertyware’s ePayments Settings, ensure that each portfolio convenience fee is the same for ACH and credit card payments.
     
     
• After January 19, 2012, if you have not already switched to having the same convenience fee for both ACH and credit cards, your settings will default to charging the lower fee you currently have set up. If your current setup charges convenience fees for credit card payments, but not for ACH, your settings will default to not charging a convenience fee for either payment type.
  
  
• Also, if you have different convenience fees set up as exceptions for individual portfolios, Propertyware will default the convenience fee to the lower convenience fee amount you have for that portfolio. Portfolio exceptions, if any, are listed at the bottom of the ePayment settings page.

• Review any auto-payments your tenants may have in place that will need to be revised or disabled under your new policies. For example, if you will no longer accept credit cards for tenant payments, you should advise your tenants to revise or delete any auto-payments they have set up to be paid via credit card.

• If your company adds auto-charges to tenant ledgers relative to payment processing fees, you should determine whether such charges may be a violation of Credit Card Company rules.

As you may know, Credit Card Company rules also prohibit:

• Charging a variable or percentage-based convenience fee on payments made by credit card.

• Adding a convenience fee to credit card payments authorized by payor in-person.

In addition, some states have rules that restrict the use of convenience fees beyond the rules of the credit card companies. Please check the laws in your area to make certain that your company’s convenience fee policies conform to local laws. States with rules governing convenience fees may include California, Colorado, Connecticut, Florida, Kansas, Maine, Maryland, Massachusetts, New York, Oklahoma, and Texas.


Revising your ePayments Policies

How might a Property Management Company implement ePayments under the single convenience fee rule? Let’s look at an example. Company XYZ Property Management wants to accept credit cards, but doesn’t want to absorb expensive credit card expenses.

• Their rents average $800/month, but they also manage some vacation properties that rent for $2,000 per week.

• The ACH transactional cost is $0.50, whether it is on an $800 payment or a $2,000 payment.

• The credit card cost is approximately $16 on an $800 payment, $40 on a $2,000 payment (rates vary based on the brand and type of card used).

• They will only be able to set one single convenience fee, which will apply to both ACH and Credit Card payments. If they establish a convenience fee of $20 to offset the cost of credit card expense, they will also have to charge $20 for ACH payments. Residents wanting to pay via ACH will likely view a $20 convenience fee as excessive and opt to pay by check.

XYZ Property Management has a few options for how they can manage their convenience fees:

Option #1

• XYZ Property Management adopts a strategy to set their convenience fee at $1, and to stop accepting credit cards for one-time or auto payments.

• They continue to allow credit card payments for application fees (a situation where a convenience fee would not be added), so they can limit the cost of credit card transactions but still allow applicants to apply online and improve their occupancy.

Option #2

• XYZ Property Management decides to set their convenience fee at $20 to cover the average cost of a credit card payment.  Tenants originating one-time ACH payments will also get this fee.

• They continue to accept credit cards for application fees, and charge no convenience fee for this.

• Tenants setting up auto payments are not charged a convenience fee for either ACH or credit card payments.

Option #3

• XYZ Property Management wants to keep allowing customers to pay via credit card or ACH, and chooses not to charge a convenience fee for one-time or auto payments,  knowing that allowing these payment options gives them a competitive advantage. In this model, XYZ absorbs the transactional cost if tenants pay via credit card or ACH.

• XYZ could elect to set a maximum dollar amount they will allow for residents (or owners) to make payments via credit card, to limit their exposure to absorbing credit card transactional fees.

For more information on the credit card companies’ rules:

 VISA

1. Go to www.visa.com.
2. Select Merchants.
3. Select Operations & Procedures.
4. Select Visa Operation Regulations.
5. Click on the Visa International Operating Regulations.
6. Refer to Section 5.2.E – Convenience Fees.

MasterCard

1. Go to www.mastercard.com.
2. Choose North America, then United States: English.
3. Select the Merchants tab at the top right of the page.
4. Click MasterCard Rules, under the Rates and Rules section at the bottom of the page.
5. Refer to section 5.11.2 – Charges to Cardholders.

American Express

1. Go to www.americanexpress.com.
2. Click on Business at the top of the page.
3. Under Merchants, select Get Support.
4. Under Quick Links on the right side of the page, click Merchant policy.
5. Under General Information, click on the American Express Merchant Reference Guide.
6. Refer to section 3.3 – Prohibited Uses of the Card.