Reversing and refunding a payment transaction

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Reversing and refunding a payment transaction

There may be situations where a lender needs to reverse a payment. For example, if the borrower makes the payment twice, or the borrower pays in excess and lender needs to reverse and re-submit a payment. In such cases, you can reverse a previously created transaction that is posted on the loan contract. The Cleared checkbox on the loan payment transaction detail page, or the Transactions, Payments tab identifies that the transaction is cleared and posted. In addition, you can see the payment amount split between the principal, interest and fee component, for a posted transaction. 

A reversal can be done for any payment related transaction, such as, an investor fund transaction, loan disbursal, loan payments, and an investor loan transaction. Once the reversal is processed:

  • The Cleared checkbox is selected in the payment transaction reversal detail page. If the reversal transaction fails, the Rejected checkbox is selected.

  • The Cleared and Reversed checkboxes are selected for the original loan payment transaction in the transaction detail page and the Transactions tab.

  • The status of the contract is returned to the state prior to the transaction.

  • The balances, such as principal, interest, and fees and any interest postings for investors are reverted to the original state. 

When the payment s reversed, the Reason Code field on the reversal LPT displays the reversal reason. 

Last payment on a contract: Reversing the last payment on a loan reverts the loan status to Active. You must run the Investor Payout Reversal job to reverse the related investor loan transaction and revert the status of the investment order from Inactive to Active. 

Interest posting enabled loans: For loans where interest posting is enabled, when you reverse a payment transaction, the interest posting transactions that are partially or fully paid by the payment are reversed to their original state. This applies even in cases where the transaction to be reversed is not the latest transaction, and you must reverse transactions in LIFO order to reach it. The bills and interest postings satisfied through these payments accordingly get marked as paid or partially paid based on the reversed amounts. Similarly, interest posting transactions generated post this LPT are marked as reversed and do not affect the contract status. 

Consolidated loan payment: In case of reversal of a consolidated loan payment, the system internally reverses the payments for the constituent loan contracts in LIFO order.

Prepayment causing loan reschedule: In CL Loan 2.4008 and later, reversal of a prepayment that caused a reschedule of the loan also reverses the reschedule action. The original payment schedule is reinstated. Any IPTs created after the reschedule are discarded and created again when the SOD job runs next.  Similarly, any bills generated after prepayment are discarded and new bills are generated for the new schedule after reversal when the Billing job runs next. The Loan Payment ID field in the reschedule transaction identifies the payment that caused the reschedule, and upon its reversal, the system also reverses the reschedule, if you are upgrading to CL Loan 2.4008 or later, you must add this field to the reschedule transaction page layout. For more information, refer to section Reverse a Payment Transaction. 

LOC payment: In case of LOC, when a payment transaction gets reversed, all the bills that have their due dates after the payment date, are marked as non primary. All such bills are regenerated as part of the SOD job. CL Loan uses the 'Loan Snapshot' on the Repayment Transaction Adjustment object that captures the loan snapshot at every LPT reversal, and the 'Parent Rate Schedule Setup' on the Rate Schedule Setup object. Using these, it calculates the original interest rate in case any rate change action was performed between the payment date and its reversal date, and generates the bills again. 

The bills satisfied by that payment are marked unpaid. For any charges that were included in those bills, the "Is Included in Bills" field is set to False, and these are picked up again when fresh bills are generated.

Refunds

Along with the reversal, you can also refund the borrower's payment. GL entries are created for both the transactions, payment reversal, and payment refund. Refunds can be made anytime during the life of a contract without waiting for loan closure. However, refund of only full payments is possible. 

Once the Loan Refund batch job runs, the refund of the latest payment is processed by the LoanRepaymentRefundTxnSweepToACHJob job, which is linked in the SOD job chain, and the associated ACH file is created. 

Example - Borrower made a payment of 100,000 instead of 10,000, and requests for a refund of 90,000 made in error. Lender does a full refund of 100,000, and requests for payment of 10,000. The payment reversal, and refund of the last payment transaction to the borrower is made by the lender.

Prerequisites

The following are the prerequisites to reversing and refunding a payment transaction:

  • The contract is in Active status.

  • The transaction to be reversed is the last transaction. 

Steps

Perform the following steps to reverse and refund the latest payment transaction:

  1. Login to your Salesforce account.

  2. Click Contracts.

  3. Select a contract with Active Good or Bad Standing status.

  4. Click Transactions.

  5. Click Payments.

  6. Select the latest Loan Payment Transaction ID.

  7. Scroll to the Repayment Transaction Reversal section and click New Payment Transaction Reversal.

  8. In the Payment Reversal page, specify the following:

    1. Select the Reason Code.

      This can be NSF (non sufficient funds), Human Error, or Other.

    2. Select the Date of reversal.

    3. Specify the Reference, for example, original cheque number.

    4. Select the Refund to Borrower checkbox if a refund has to be made.

      Additional fields are displayed.

    5. Select the Refund to Bank Account to which the refund amount is to be credited.

    6. Click Save.

Field reference

Field Name

Description

Reason Code

The reason for making a reversal.

  • Select NSF(non sufficient funds) if the payment transaction amount is lesser than the available balance in the borrower's account.

  • Select Human error if there is a data entry error.

  • Select Other to indicate any other reason.
Date The date on which the reversal is to be done.
Reference Any description or reference information to be stored with the transaction. For example, "third reversal by borrower".
Refund to Borrower Selection indicates that a refund of the reversed amount is to be made to the borrower.
Refund to Bank Account The borrower account to which the refund resulting from the payment is credited.

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