Payment Of Association Fees: To Paypal, Or Not To Paypal?

As technology becomes more important every day, many Associations are faced with the decision: do we offer to let our owners pay through PayPal or do we only let the owners pay with a check, cash or money order? Many of our Associations have begun to allow owners to pay maintenance fees with PayPal, however, there are a few things to keep in mind before the Board opens up that option.

Costs

Although PayPal may seem convenient, it certainly does not come free, or cheap, for that matter. The monthly charge for PayPal is usually $30.00 per month, and this is a cost that cannot be billed back to the individual owners. In addition, PayPal charges a fee of 2%-4% per transaction, depending upon the credit card or method of payment used by the customer. This is a cost that the Association has to bear, and again, this cannot be passed back to the owner per the agreement with PayPal. For example, if you have a $300 maintenance fee, the transaction fee is around $10.70. While this may not seem significant, if you have 800 lots, this may end up putting a serious dent into your budget if most everyone chooses to use PayPal.

Monitoring

If you have a property management company, some may already offer online credit cards payments, but some don’t. Some Boards have opted to use PayPal even though it isn’t offered by their management company. This may be problematic when the management company is keeping payment records, but a Board Member handles the PayPal account. A lack of communication can be problematic and result in unwarranted collection action on an owner who has actually paid. Make sure that payments are reported regularly to the management company or whoever is maintaining account records. This may be easier for Associations with annual fees rather than monthly fees, as there is monitoring only once yearly per unit/lot rather than 12 times per year.

Likelihood of Payment

Since so many people rely on credit cards nowadays, offering PayPal may be the only way to get a payment from some owners. They may not have the cash in their checking account, but most certainly can put the balance on a credit card. We’ve seen many Associations improve their delinquency rates after offering credit card payments.

Set-up of System

Using PayPal may be as simple as setting up an account online and taking the credit card information for the owner. However, many Associations prefer to add a link to their Website to allow for the payments. While this may not necessarily be difficult, depending on the intricacy of your website, you may need to hire a professional to assist. Or you may not yet have a Website and may need to create one from scratch. PayPal also offers the option to send invoices via electronic mail with a “Pay It Now” option. Essentially, your owner gets an email and can instantaneously pay the invoice, which may save postage costs for some Associations. The owner does not have to have a PayPal account set-up in order to use this option.

Disputes

Another problem that may arise is with regard to disputes. If an owner sends a check and it is cashed, the owner does not have the ability to ask the bank for that money back. However, in a PayPal transaction, the owner does have recourse through a PayPal disputes process. The money is then taken back out of your account until the dispute has been resolved. This may cause issues for the Association, as the PayPal account must be linked to a checking account. So if Mr. Smith paid a past due balance of $2,000.00 then disputes the transaction, the snowplow contractor may have a check bounce if you were counting on that money to be in the account.

When the Association uses PayPal, it agrees to Terms and Conditions, which include using claim specialists to handle disputes between the parties and ultimately render a decision. If one of the parties fails to comply with a request for information, there may be a “default” decision.

Because of the disputes process, it is advisable that you do not use PayPal to collect funds from a seriously delinquent person to resolve a foreclosure matter or in order for them to sell their property. You may find out that the Association really hasn’t gotten paid after all.

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