Defining a fee

Overview

You have the flexibility to define the fees applied on a CL Contract. The fee may be part of the lending product definition, such as processing fee, or be derived based on borrower actions, such as NSF fees for insufficient funds in borrower account for payments. Multiple fees are combined to form fee sets and are then linked to the lending products. Except for pre-paid fees, which are configured independently, all the fees must be present in the fee set associated with the lending product or loan contract in order to be applied.

In case of fees that may be chargeable multiple times, such as late fee, lenders can customize the conditions under which the fee is applied. For example, one lender may charge a late fee only when the first payment is delinquent and not for subsequent consecutive payments that remain unpaid. Another lender, however, may want to charge a late fee for each delinquent payment. A third vendor may apply late fee only for the first three consecutive non-payments, and so on. These conditions can be defined using a custom class that overrides the default CL Loan charge application decisioning. 

You can enable capitalization of a fee, whereby, the fee amount is added to the loan balance and interest is accrued on it, in situations of late or non payment of the fee. In the default payment spread, this interest is recovered before satisfying the other components of interest, fee and principal balance. However, you cannot add a capitalized fee to a non-interest bearing loan, such as amortization based loan or a line of credit. 

As part of fee setup and CL Loan configuration, you can define the number of days before the same fee can be reapplied on the contract. This default minimum number of days for a recurrent charge are specified in the lending product definition.

The following are some examples of the commonly configured fees:

Prerequisites

None.

Steps

To define a fee:

1. Log in to your Salesforce account.

2. Click Servicing Configuration.

3. Go to Product, Fee Setup.

4. Click Manage Fees.

   The Fee page is displayed.

5. Click Define New Fee.The New Fee page is displayed.

6. In the Fee Detail section:

   1. Specify aFee Name. For example, Late Fee.

   2. Select the State to specify the status of the fee. The options include Active and Inactive. A fee must be active to be applied on a contract.

   3. Select the Purpose. The default value is None. Select Protect to create a fee called Protect, to be used for the Protect feature. 

      Note:

      The steps listed below pertain to the fee category of Loan. The fee categories Client and Group have been deprecated as they no longer impact product functionality.

   4. Select the Fee Category. The options include Loan, Group, and Client. The fee category of a fee and fee set must be the same to add the fee to the fee set. 

   5. Select the Time of charge. This is dependent on the category of fee selected. It defines the event on which the charge must be applied automatically.

   6. Specify the Custom Fee Application Condition Class. This is required if you want to override the default application logic with custom logic for applying late, NSF, or payoff recurring fees . 

      Note:

      If you are upgrading from a previous version of CL Loan, you must add this field to the Fee page. For more information, refer to section Custom Application of Fees.

7. In the Fee Calculation section:

   1. Select the Fee Calculation Method. This defines how the fee amount is calculated.

   2. Specify the number or percentage Amount of fee to be charged. For example, if the fee is calculated as 1% of loan amount, then enter "1" in the Amount field.

      Note:

      The amount for Fixed time calculation method is a flat amount, but the amount is a % value for other fee calculation methods except Custom.

   3. Select the Interest Bearing checkbox if interest is accrued and charged on the fee amount in case of late payment of fee. You must select either this or the Enable Fee Capitalization checkbox.

   4. Specify the Interest Rate if this is an interest bearing fee, to indicate the rate at which interest is accrued on the fee amount. For example, if the fee is 100, then 1% rate of interest per month would accumulate $1 for 1 month. 

   5. Specify the Minimum Amount to be charged. This applies to both fixed fee amounts and fees derived as % amounts.

   6. Specify the Maximum Amount to be charged. This applies to both fixed fee amounts and fees derived as % amounts.

   7. Select the Enable Fee Capitalization checkbox to add the fee to the loan balance and apply interest on it.

      Note:

      You cannot add a capitalized fee to an amortization based loan or a line of credit. If you attach a fee set containing a capitalized fee, while creating the lending product, an error is displayed.

8. In the Advanced section:

   1. Specify the Minimum Days Past Due On Contract. This is applicable only for late fees. It is the minimum number of days that the payment must be past due for a late fee to be charged.

   2. Specify the Maximum Days Past Due On Contract since the last payment was made on the contract.

      The default value is -1. The value of -1 ensures that the fee remains applicable till it is paid up, even beyond the maximum date ranges specified.

      If you do not want the system to consider a date range, and directly apply the fee, both these fields must be left blank.

      Note:

      The Maximum Days Past Due on the contract must be specified as -1, as this allows the late fee to remain applicable beyond the specified range of days past due, till it is paid by the borrower.

9. Specify the Investor Share (%),  which is the percentage of fee payment distributed to investors who have funded the loan. For information on how multiple investors can fund a loan, and receive returns on it, refer to section Fractionalization.

10. Specify the Minimum Days for Recurrent Charge of the same fee. This does not apply to a fee with time of charge as Pre-Paid Fees.

11. Select the N/A In Case Of Uncleared Transactions checkbox if late fee must not be charged in cases where the payment is received from the borrower, and is either in uncleared status with the bank, or is in the lock period specified for the contract.

12. Specify the following Fee Accounts:

    1. Fee Income 

    2. Fee Prepay 

    3. Fee Expense 

    4. Fee Unearned Income 

13. Click Save to save the fee

Field Reference