Waiver of fees post payment of fees
Overview
A waiver of fees after fee payment refers to a scenario in which we try to waive a fee which has already been paid by the borrower. When a fee waiver is granted after fees have been paid, there are two ways we can adjust the fee, either we can return the full amount which was paid (kept in Excess) through refund transaction or adjust that amount to the principal component of the loan. The loan's principal amount is reduced from the date of the waiver. The interest amount is also adjusted accordingly to reflect the reduced principal amount. This means that the borrower is not required to pay interest on the portion of the adjusted principal.
The ability to waive a paid fee and adjust the principal and interest amounts accordingly provides more flexibility and support for borrowers.
This feature only supports the full waiver of the paid fees. By selecting Paid Charge Waiver, the entire fees are waived.
Waive the paid fees
Prerequisite
Interest Posting Frequency = Monthly
Enable Adjustment Entry = True
Steps
Log in to your Salesforce account.
Click CL Contracts and create a new contract.
Go to Loan Quick Menu > Loan Actions > Waiver Actions.
Click Waiver Type and select Paid Charge Waiver.
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Select the required charge to waive and then click Save.
The paid charge will be waived off.
Example to understand waiver of fees
Let us understand the waiver of paid charges with the help of different scenarios.
Scenario 1: Trying to waive a paid charge when Enable Adjustment Entry flag is set to true and Is Capitalization Enabled flag is set to true
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Let us create a simple loan with the following details and disburse it:
Loan Amount = $10,000
Term = 10
Interest Rate = 5%
Contract Date = May 25, 2013
Payment Start Date = June 25, 2013
Payment Frequency = Monthly
Adjustment Type = Principal
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Let us create a Periodic fee with the following details:
Fee Calculation method = Fixed
Amount = $400
Periodic Fee Amount Type = Per Period Amount
Include in Dues/ Schedules = True
Enable Fee Capitalization = True
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Let us go to June 25, 2013.
The system creates a charge, and it will be capitalized.
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Let us create an LPT of amount $1,023.06 with Transaction Date as June 30, 2013.
Principal Paid = $981.39
Interest = $41.67
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Let us go to July 10, 2013, and perform a charge waiver of $400 with Transaction Date as June 30, 2013.
The values must be updated as follows:
LPT must be created with Transaction Amount = $400 and Transaction Date = 6/30/2013, Payment Type = Paid Charge Waiver
OLT must be created with Transaction Type = Paid Charge Waiver
Principal must be reduced ($10000 - $981.39) = $9018.61
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Interest Remaining = (10441.67*5*5/36000) = $7.25
Principal = (10000 + 400 (Periodic charge) + 41.67 (Interest for a month)) = $10441.67
Note:Term is 5 days from June 25 to June 30 . Since we made a payment on June 30 so LAD changes to June 30 and so Interest Remaining is calculated on 5 days.
Interest Accrued = Principal * Rate * Number of Days as per the Time Counting Method (9018.61*5*10/36000) = $12.53
Last Accrual Date = June 30, 2013
Charge must be marked paid and waived.
Scenario 2: Trying to waive a paid charge when Enable Adjustment Entry flag is set to false and Is Capitalization Enabled flag is set to true
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Let us create a simple loan with the following details and disburse it:
Loan Amount = $10,000
Term = 10
Interest Rate = 5%
Contract date = May 25, 2013
Payment Start Date = June 25, 2013
Payment frequency = Monthly
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Let us create a Periodic fee with the following details:
Fee Calculation method = Fixed
Amount = $400
Periodic Fee Amount Type = Per Period Amount
Include in Dues/ Schedules = True
Enable Fee Capitalization = True
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Let us go to June 25, 2013.
The system creates a charge, and it will be capitalized.
Let us go to June 30, 2013, and create an LPT of $400 with Transaction Date as June 30, 2013.
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Now let us go to July 10, 2013, and waive the paid charge.
The system must display the following message " You can waive a paid charge only if the Enable Adjustment Entry flag is set to true."
Scenario 3: Trying to waive a paid charge when Enable Adjustment Entry flag is set to true and Is Capitalization Enabled flag is set to false
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Let us create a simple loan with the following details and disburse it:
Loan Amount = $10,000
Term = 10
Interest Rate = 5%
Contract Date = May 25, 2013
Payment Start Date = June 25, 2013
Payment Frequency = Monthly
Adjustment Type = Principal
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Let us create a Periodic fee with the following details:
Fee Calculation method = Fixed
Amount = $400
Periodic Fee Amount Type = Per Period Amount
Include in Dues/ Schedules = True
Enable Fee Capitalization = False
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Let us go to June 25, 2013.
The system creates a charge.
Let us go to June 30, 2013, and create an LPT of $40 with Transaction Date as June 30, 2013.
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Now let us go to July 10, 2013, and waive the paid charge.
The values must be updated as follows:
LPT must be created with Transaction amount = $40 and Transaction Date = 6/30/2013, Payment Type = Paid Charge Waived
OLT must be created with Transaction Type = Paid Charge Waiver
Principal must be reduced by $40 that is ($10000 - $40 = $9960)
Interest Remaining = $13.89
Interest Accrued = $27.67
Periodic charge must be marked as waived.
Scenario 4: Trying to waive a paid charge by refunding the waive amount.
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Let us create a simple loan with the following details and disburse it:
Loan Amount = $10,000
Term = 10
Interest Rate = 5%
Contract Date = May 25, 2013
Payment Start Date = June 25, 2013
Payment Frequency = Monthly
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Let us create a Periodic fee with the following details:
Fee Calculation method = Fixed
Amount = $400
Periodic Fee Amount Type = Per Period Amount
Include in Dues/ Schedules = True
Enable Fee Capitalization = True
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Let us go to June 25, 2013.
The system creates a charge, and it will be capitalized.
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Let us go to June 30, 2013, and create an LPT of $400 with Transaction Date as June 30, 2013.
This payment goes to the Excess amount.
This amount can be refunded by the refund transaction.