Automated Payments

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Automated Payments

Overview

An automatic payment is an arrangement for a specific amount of money to be debited from the borrower's bank account and credited to the lender's bank account. Automated payments are processed through the Automated Clearing House (ACH). This means that a lender can automate the payment made by a borrower towards a loan through the Automated Clearing House (ACH). ACH is a nationwide EFT (Electronic Funds Transfer) system that provides for the inter-bank clearing of credit and debit transactions through batch processing. ACH also provides for the exchange of information among participating financial institutions. It is a batch processing system in which financial institutions accumulate ACH transactions throughout the day for later batch processing.

ACH Network transactions are transmitted electronically. This leads to faster processing time and cost savings. Setting up electronic payments also reduces the number of late payments; which in turn reduces the late fees.

In most cases, an ACH file is generated that must be sent to a bank for clearing. The system creates a file for an amount and it contains the details of the bank which to debit and the bank to which to credit. This file is then sent to the bank, and once the bank approves, it clears the payment.

Note:

The recurring ACH frequency need not be the same as the loan repayment frequency. The debit date must be the same as the recurring ACH start date. The debit date must be the same as or earlier than the current system date.

NACHA Format

ACH files follow the NACHA format. NACHA is a non-profit membership association charged with overseeing the ACH (Automated Clearing House) system. This operates the largest electronic payment network in the world. Each NACHA file contains 500 records in CL Loan. These records contain information about the accounts which have to be debited and the loans for which the amount will be debited. This NACHA file is sent to the authorized bank and is processed by this bank. A NACHA file is generated when the next debit date is reached.

Note:

 ACH processing generates NACHA files, which include disbursal transactions where Sent to ACH is False, and the payment mode matches the automated payment configuration. Once the ACH file is generated, the Sent to ACH checkbox is set to True for these disbursal transactions.

Types of ACH transactions

A lender can set up two types of ACH: 

Recurring ACH

Borrowers can select the ACH frequency, for example, weekly or biweekly. Based on this, the system automatically posts the payment to the borrower's contract and the amount is debited from the borrower's bank account. The recurring ACH frequency need not be the same as the loan repayment frequency.

For example,

    • If the ACH Frequency is Monthly
    • Start date is 1/1/2013
    • End date is 1/12/2013
    • Next ACH Debit date is 1/15/2013
    • The Current system date is 1/1/2013.

When the system's date reaches the Next ACH Debit date (In this case, 1/15/2013)

    • A NACHA file is generated for this date with details such as the date on which this NACHA payment has to be posted, the date on which this NACHA file has to be generated, the name of the bank, and the name of the branch.
    • An ACH Batch is created for this particular date.
    • The Next ACH debit date is updated based on the ACH Frequency. Here, as the ACH Frequency is defined as Monthly, the Next ACH debit date is updated as of 2/15/2013.Therefore, on the 15th of every month, the system automatically posts the regular installment to the drawer’s account, and the installment is debited from that account. 

One Time ACH

For a single selected date, the system automatically posts the payment to the borrower's contract and the amount is debited from the borrower's bank account.

For example,

If the Next ACH debit date is 6/19/2013, and the current system date is 6/1/2013,

the system automatically debits the amount on 6/1/2013 once the system date reaches 6/1/2013. 

Note:

If both one-time and recurring transactions are set up for the same day for a loan contract, these are processed in the ascending order of the date and time.

Information Required to make an ACH Payment

The following information is needed to allow your customers to make ACH payments:

    • The customer's bank account details for the ACH transaction.

    • The ACH account number.

    • The ACH debit amount.

    • The ACH start date and end date.

    • ACH debit date.

Multiple Payment Modes

CL Loan versions 1.2002 and later support multiple payment modes for creating payment transactions. For each business event, such as loan payment, loan disbursal, or investor deposit, you can set up different payment modes (such as cash, ACH, credit card, wire, cheque) and specify the file format (such as NACHA, or SEPA) and type (such as text, csv, pdf, xml) to be generated for each of these. At the CL Loan application level, a different batch job processes the payment transactions, and a different batch job creates the payment files based on the payment configurations you set up.  For example, for the business event Loan Payment, you may set up payment modes of Cash, Credit Card, ACH, and Demand Draft. Further, for Credit Card payments, you may generate NACHA files in XML format.  

Prerequisites

To support multiple payment modes, you must:

  1. Enable the ACH parameter Multiple Payment Method Support. 

  2. Set up the Automated Payment Configuration for each payment mode, and 

  3. Set up the automated payment details in the respective loan contract. 

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