Automated consolidated payments

Overview

Automated consolidated payments involve consolidating multiple payments (Loan Payment Transactions) that a borrower is required to make into a single consolidated payment via an ACH file, provided the payments share the same due date, are debited from the same bank account, utilize the same payment mode, and belong to the same master facility parent loan.

The loan payment transactions (LPTs) of child loans under a given master facility are bundled in the form of a cash receipt, based on the following criteria:

• All these LPTs across the child loans have the same payment due date

• All these LPTs have the same bank account for debit

• All LPTs belong to a single master facility

• All LPTs have one payment mode

Consequently, an automated consolidated payment is an ACH file sent to the bank for the consolidated payments. Each consolidated payment is in the form of a cash receipt for a single master facility for a borrower using the same payment mode with the same due date. Each cash receipt further consists of payment applications that are nothing but the LPTs, from different child loans, bundled together based on the aforementioned four criteria.

For example, consider a borrower with five contracts. The payment to the bank in the form of an ACH file would take place five times as there are five contracts. If these five contracts belong to the same borrower account (in this case, same master facility) and have the same due date with the same payment mode, then it would be preferential if the sending of the ACH file to the bank occurred once per account. For this, Q2 Loan Servicing has developed a system of consolidation called as the automated consolidated payment, which creates a single item in an ACH file for the whole payment amount together rather than many items.

The implementation of automated consolidated payments do not require any changes on the bank's end. This is because, rather than sending, say, five $50s from account A, the system sends one $250 from account A. Thus, the system automatically consolidates the payments into a single line item, ensuring a smooth transition without requiring changes to the bank's processing methods.

You must configure automated consolidated payments in the system to use this feature.

Key features

This section briefly describes the key features of the automated consolidated payments.

Consolidation

• Payments are only consolidated if they have the same due date, bank account, master facility, and payment mode.

• For example, if two child loans from the same master facility have different bank accounts but same due date, two separate consolidated cash receipts are generated for them and for the same master facility.

  In other words, the system automatically consolidates all child loan payments based on the preceding conditions for a master facility and generates cash receipts accordingly.

• Consolidation occurs only when automated payment is set for the master facility.

ACH file

• The ACH file generated on the due date contains a single record per master facility, totaling all the child dues within that master facility on that date.

• The ConsolidatedPaymentfilegenJob generates an ACH file for each consolidated payment.

Automated consolidated payments

• The payments in the form of cash receipts are processed at the master facility level and allocated to the child loans.

• For a borrower, the system consolidates the payment records for each child contract within a master facility on every due date where all the child contracts have the same due date, so that the borrower's account is debited only once with an amount equal to the sum of billed amounts from all child loans falling on the said due date.

• LPTs are cleared in the order such that the LPTs of the same cash receipt get cleared together.

• When a consolidated payment is made, the LPT corresponding to the cash receipt payment application is updated with the Automated Payment Setup ID and the Cash Receipt Application ID as highlighted in the following image:

  

Transaction Approval Config

• If the Transaction Approval Config for Loan Payment is selected for an automated consolidated payment, then the payment creation job, which is LoanPaymentTransactionCreationJob, that is run as part of the Start Of the Day processes (SOD) creates the LPTs on the child loans but does not clear them. The LPTs are cleared only when the clearing job, LoanPaymentTxnClearingDynamicJob, runs next and if the approval has been provided. This clearing job is in the DAG, Default Start of Day Dynamic Jobs With Multiple Payment Mode Support. The next time when this clearing job runs, it checks for the approval. If it finds the approval for any payments, it clears those payments.

  Note:

  For more information on Transaction Approval Configuration, see Define Transaction Approval Configuration.

Manual consolidated payments

• You can also make manual consolidated payments by manually creating a cash receipt that is associated with a master facility loan. Once you create a cash receipt, you can clear the payment by selecting the Clear Payments button on the UI.

  Note:

  For more information on steps to create a manual consolidated payment and then clear it, see Make a manual consolidated payment.

Consolidated payment reversals

• The system reads the consolidated reverse file and reverses the transaction entries in the master facility loan and its child loans to ensure data integrity and accounting.

• When reversing a payment, the system searches back through the child loans beginning with the most recent. This means that newest LPT is reversed first.

• When you reverse a consolidated payment, the system reverses the payment transactions in all the child loans. (A consolidated payment refers to one cash receipt and one cash receipt applies to one master facility, but one master facility may have many contracts, so when you reverse a cash receipt, all the transactions of that cash receipt from different child loans are reversed.)

• If you reverse or cancel a cash receipt through the UI and any of the LPTs have been rejected, the system will still proceed with the reversal of that cash receipt.

• If any of the LPTs are not cleared, the system rejects them and proceeds to reverse the remaining LPTs.

Bulk reversals

• You can do a bulk reversal of consolidated payments or cash receipts. This means you can reverse multiple cash receipts at once. For bulk reversal of cash receipts, upload an ACH return file with cash receipt IDs and the cash receipts will be reversed in bulk.

• For bulk cash receipt reversal, you may alternatively utilize the global API listed below:

  • global Map<ID, String> bulkReverseAndCancelCashReceipt(List<Id> cashReceiptIds, Map<Id, String> returnCodeMap)

  Note:

  For more information on this API, see the bulkReverseAndCancelCashReceipt() global method of the CashReceiptService class of the Q2 Loan Servicing Global Methods Guide.

Payment rejections

• The implementation of automated consolidated payments also includes mechanisms to address instances of payment rejection too. In the event that a consolidated payment is rejected, such as due to insufficient funds or account closure, a single fee is charged for the entire group of payments included in the consolidation. This consolidated fee approach simplifies fee assessment and minimizes the administrative burden associated with managing multiple rejection instances.

Payment retrial

• To allow the consolidated retrial of rejected payments, you must ceate a consolidated retrial configuration by selecting the Consolidated Retry Config in Servicing Configuration. The existing LoanPaymentTransactionCreationJob uses the created retry configuration to generate a retry LPT and cash receipts for the master-child loans.

  Note:

  For additional details on Consolidated Retry Config, refer to Step 2 of Configure automated consolidted payments for a master facility loan.

• Every child loan has a unique automated payment setup because each child loan may have a different payment frequency. As a result, the retries are also considered for the child loans.

Dishonor (NSF) fee

• A dishonor (NSF) fee is applied whenever a payment is reversed or rejected and the defined number of retries matches.

• A dishonor fee is applied directly to the master facility (rather than individual child loans), so the borrower is not charged a dishonor fee multiple times for reversing child loans.

  For example, if number of retries allowed is three and if two child contracts fail these number of retries, the system generates only one fee on the master facility parent loan.

Payoff

• You can generate a payoff quote at the master facility level, so that you can pay off the full loan at once by maintaining sufficient balance in your bank account for debit.

Principal Adjustment

• In addition to the child and other loan contracts, the master facility loan contracts also allow principal adjustments.

Benefit of this feature

• Borrowers benefit from automated consolidated payments, which debit their bank account only once on the due date for the consolidated amount of all Loan Payment Transactions (LPTs) that match the preceding four conditions.

• If the borrower's bank account is insufficiently funded on the due date, just one consolidated cash receipt is reversed, and the borrower is charged a dishonor fee once.