Understanding Late Charge Methods

Portico provides several methods for assessing and collecting late charges for delinquent loan payments. Late charges can be calculated during payment application or assessed in the back-office cycle when the loan is eligible for the fee.

Grace Days

Regardless of the late charge option, you can define the number of grace days a loan can be delinquent before late charges will be assessed. If the Late Charges Date field on the Loans – Interest/Charges tab is within the number of grace days, no late fee is calculated or collected.

Flat Fee Option

The Flat Fee field on the Loan Profiles - Collections/Late Charges tab lets you define a flat fee that will be assessed for delinquent loan payments.

Deferred Late Charges

Late charges may be deferred to collect at a later time. The deferred late charge amount will update the Late Charges Uncollected Amount field on the Loans - General tab. If the late charge is not collected at the time of payment, the Late Charge field on the Adjustments Loan Payment from General Ledger tab can be used to collect the deferred late charge.

For 360-day interest loans, partial payments are not allowed. Any excess funds that will cover late fees will be collected during a payment on a 360-day interest loan instead of being added to the deferred/uncollected late charges bucket, even if the loan is delinquent. If the excess funds applied covers more than the late fees and not the entire next payment, a system edit of “No partial payments on Monthly Interest Loans” will appear. If there are no late fees, funds would be applied towards another payment entry, since partial payments are not allowed on 360-day interest loans.
For 365-day interest loans with advance date option 2, partial payments are applied towards advancing of the due date. Even if the loan is delinquent, 365-day interest loans will defer late fees until the loan is current.

Loans can be paid off with deferred late charges outstanding. Paid off loans with deferred late charges will have a Y in the DEF LTG column of the Paid Out and Closed Account Report 090.

Late Charge Date Option

Portico provides a late charge method that ensures that a late charge will only be assessed once on a delinquent payment regardless of the period of delinquency. The Percent to Avoid a Late Fee field on the Loan Profiles - Collections/Late Charges tab lets you specify a percentage from 1 to 100%, giving you greater control over how your late charges are assessed. If the Percent to Avoid a Late Fee field is 50 and more than 50% of the scheduled loan payment has not been applied by the end of the grace period for the loan payment due date, a late charge is assessed.

For the Late Charge Date Option method, Portico uses the Grace Days field and Percent to Avoid a Late Fee field on the Loan Profiles - Collections/Late Charges tab, the Late Charges Date field on the Loans – Interest/Charges tab, and the Payment Amount field and Partial Accumulation field on the Loans - Payment tab to determine if a late charge should be assessed for a delinquent payment.

When a loan is delinquent greater than the grace days specified in the Grace Days field on the Loan Profiles - Collections/Late Charges tab for the loan type, Portico checks the Late Charges Date field on the Loans – Interest/Charges tab to determine whether a late fee should be calculated and collected.

If the late charge date is within the number of grace days, no late fee is calculated or collected. If the late charge date is greater than the number of grace days, Portico looks at the Percent to Avoid a Late Fee field on the Loan Profiles - Collections/Late Charges tab and the values in the Partial Accumulation field to determine if a late fee should be calculated and collected.

If the value in the Partial Accumulation field is less than or equal to the percentage of the payment amount (Payment Amount x Percent to Avoid a Late Fee), a late fee is assessed.
If the value in the Partial Accumulation field is greater than the percentage of the payment amount (Payment Amount x Percent to Avoid a Late Fee), a late fee is not assessed.

The following examples assume that the loan's payment due date and late charges date are greater than the grace days for the loan type.

Scenario	Example 1	Example 2	Example 3	Example 4	Example 5
Percent to Avoid a Late Fee	50%	50%	75%	100%	1%
Loan Type Grace Days	10	10	10	10	10
Payment Due Date	7/23/16	7/23/16	7/23/16	7/23/16	7/23/16
Late Charges Date	7/23/16	7/23/16	7/23/16	7/23/16	7/23/16
Payment Amount	200.00	200.00	200.00	200.00	200.00
Partial Accumulation	100.00	100.01	100.00	199.99	5.00
Payment Amount x Percent to Avoid a Late Fee	200 x 50% = 100.00	200 x 50% = 100.00	200 x 75% = 150.00	200 x 100% = 200.00	200 x 1% = 2.00
Late Fee?	Yes	No	Yes	Yes	No

The bolded number indicates the greater value. If the Partial Accumulation is greater, then a late fee is not assessed.

Variable Late Charge Option

With this late charge method, the late charge amount can be a single calculated amount, the lesser of two calculated amounts or the greater of two amounts calculated. The following fields on the Loan Profiles - Collections/Late Charges tab determine are used in determining late charges.

Field	Description
Rule Option	Indicates how the Rule 1 and Rule 2 fields are used in determining variable late charges for loans. The valid options are: N - Use Rule 1 amount. System default. L - Use the lesser of the two amounts calculated G - Use the greater of the two amounts calculated (Portico Host: 962 Transaction - RULE FLAG field)
Rule 1	Indicates if variable late charges are supported. This field determines the amount used as the base in the late charge calculation. When rules 1 and 2 are both used, the late charges from the calculations are compared against each other. The late charge selected is then based on the Rule Option field. The valid options are: N - Option not used. System default. The valid options supported by Calculation Method P are: P - The late charge is based on a percentage of the scheduled payment amount. If the scheduled payment amount includes escrow and the One Late Fee Per Delinquent Payment check box is not selected, the late charge will be calculated using only the principal and interest portion of the payment. If the One Late Fee Per Delinquent Payment check box is selected, the late charge will be calculated using the principal, interest, and escrow portion of the payment. A - The late charge is based on a percentage of the transaction amount being applied to the loan. Not valid with payment type 007. T - The late charge is based on a percentage of the delinquent amount of the loan. Not valid with payment type 007. After the late charge is calculated based on the delinquent amount, the following checks and calculations take place: If Txn Amount – Calculated Late Charge < Late Charge Base If Calculated Late Charge > Minimum Late Charge from Rule Late Charge = Txn Amount – [Txn Amount/(1 + Late Charge %)] Apply Late Charge Max/Min The Late Charge Calculation above is algebraically equivalent to this: Late Charge = (Txn Amount X LC Percentage)/(1 + LC Percentage) I - The late charge is based on a percentage of the interest due from the interest-paid date up to the due date (does not include FCCBNC). Not valid with payment type 007. D - The late charge is based on a percentage of the interest due from the interest-paid date up to the current effective date (includes FCCBNC). Not valid with payment type 007. X - The late charge is based on a percentage of the transaction amount when the transaction amount is less than the scheduled payment amount. The late charge is based on a percentage of the scheduled payment amount when the transaction amount is equal to or greater than the scheduled payment amount. Portico uses the Late Charges Paid To Date field on the Loans - General tab. S - The late charge is based on a percentage of the loan amount past due. The late charge date from the Loans - General tab is used to determine how many payments are overdue. Escrow is included in the calculation of the loan amount past due when the loan supports escrow. When the loan due date is not current then the following can occur when a payment is applied: If the late charge date is less than or equal to the due date, then the partial payment accumulator will be considered when the loan amount past due is calculated. If the late charge date is greater than the due date, then the partial payment accumulator is not considered when the loan amount past due is calculated. When using late charge method S and the loan frequency is 0, par accum is always used in the online calculation of the late charge amount. Also, if multiple partial payments are applied online, Portico will always take a late charge due to the late charge date not being advanced. When using late charge method S and the delinquency method is B, the system uses the Late Charges Paid To Date field on the Loans - General tab to calculate the amount past due. W - The late charge is calculated according to the Wisconsin state criteria. Late charges are calculated as a percentage of the unpaid portion of the overdue payment. Payments made within the grace days of a due date will be applied towards the current payment, then the delinquent payment. Thus, if a partial payment is made on a current payment then the payment becomes delinquent, the late charge will be based on the portion of the payment that has not been applied. The loan maturity date will be used so that no late charge will be calculated and taken for the final loan due date or any payments thereafter. If the loan maturity date is blank for a loan, a late charge will always be calculated if the loan meets the criteria. When using late charge method W and the delinquency method is B, the system does not use the Loans - Amortization tab to calculate the amount past due or the delinquency amount. When using late charge method W and the loan frequency is 0, a late charge will not be calculated and collected because the loan due date should be equal to the loan maturity date and late charges are calculated and collected on payments applied on or after the maturity date. When the payment amount includes escrow, the late charge will be calculated on the installment portion of the payment (principal and interest amounts) only. Portico will calculate the late fee using the value obtained by subtracting the escrow amount from the payment amount. To use late charge calculation rule W with a 360-day interest loan type, the loan type must be setup with payment type 007 and calculation method A (assessed late charges). The valid options supported by Calculation Method A are: P - The late charge is based on a percentage of the scheduled payment amount. If the scheduled payment amount includes escrow and the One Late Fee Per Delinquent Payment check box is not selected, the late charge will be calculated using only the principal and interest portion of the payment. If the One Late Fee Per Delinquent Payment check box is selected, the late charge will be calculated using the principal, interest, and escrow portion of the payment. X - The late charge is based on a percentage of the transaction amount when the transaction amount is less than the scheduled payment amount. If the scheduled payment amount includes escrow and the One Late Fee Per Delinquent Payment check box is not selected, the late charge will be based on a percentage of the scheduled payment amount (principal and interest only) when the transaction amount is equal to or greater than the scheduled payment amount. If the One Late Fee Per Delinquent Payment check box is selected, the late charge will be based on a percentage of the scheduled payment amount (principal, interest, and escrow). S - The late charge is based on a percentage of the loan amount past due. W - The late charge is calculated according to the Wisconsin state criteria (Portico Host: 962 Transaction - RULE 1 field)
Rule 2	Indicates if variable late charges are assessed. This field determines the amount used as the base in the late charge calculation. Rule 2 is used to compare late charge calculations only. When rules 1 and 2 are both used, the late charges from the calculations are compared against each other. The late charge selected is then based on the Rule Option field. The valid options are: N - Option not used. System default. P - The late charge is based on a percentage of the scheduled payment amount. A - The late charge is based on a percentage of the transaction amount being applied to the loan. T - The late charge is based on a percentage of the delinquent amount of the loan. After the late charge is calculated based on the delinquent amount (e.g. 525.80), performs the following checks and calculations: If Txn Amount – Calculated Late Charge < Late Charge Base If Calculated Late Charge > Minimum Late Charge from Rule Late Charge = Txn Amount – [Txn Amount/(1 + Late Charge %)] Apply Late Charge Max/Min The Late Charge Calculation above is algebraically equivalent to this: Late Charge = (Txn Amount X LC Percentage)/(1 + LC Percentage) Or LC = Tp/(1 + p) So as applied to this specific example: Late Charge = (525.80 X 0.05)/(1 + 0.05) = 26.29/1.05 = 25.04. I - The late charge is based on a percentage of the interest due from the interest-paid date up to the due date (does not include FCCBNC). D - The late charge is based on a percentage of the interest due from the interest-paid date up to the current effective date (includes FCCBNC). X - The late charge is based on a percentage of the transaction amount when the transaction amount is less than the scheduled payment amount. The late charge is based on a percentage of the scheduled payment amount when the transaction amount is equal to or greater than the scheduled payment amount. Portico uses the Late Charges Paid To Date field on the Loans - General tab. This option is not valid with Calculation Method A or payment type 007 loans. (Portico Host: 962 Transaction - RULE 2 field)

Field

Description

Rule Option

Indicates how the Rule 1 and Rule 2 fields are used in determining variable late charges for loans. The valid options are:

N - Use Rule 1 amount. System default.

L - Use the lesser of the two amounts calculated

G - Use the greater of the two amounts calculated

(Portico Host: 962 Transaction - RULE FLAG field)

Rule 1

Indicates if variable late charges are supported. This field determines the amount used as the base in the late charge calculation. When rules 1 and 2 are both used, the late charges from the calculations are compared against each other. The late charge selected is then based on the Rule Option field. The valid options are:

N - Option not used. System default.

The valid options supported by Calculation Method P are:

P - The late charge is based on a percentage of the scheduled payment amount. If the scheduled payment amount includes escrow and the One Late Fee Per Delinquent Payment check box is not selected, the late charge will be calculated using only the principal and interest portion of the payment. If the One Late Fee Per Delinquent Payment check box is selected, the late charge will be calculated using the principal, interest, and escrow portion of the payment.

A - The late charge is based on a percentage of the transaction amount being applied to the loan. Not valid with payment type 007.

T - The late charge is based on a percentage of the delinquent amount of the loan. Not valid with payment type 007. After the late charge is calculated based on the delinquent amount, the following checks and calculations take place:

If Txn Amount – Calculated Late Charge < Late Charge Base
If Calculated Late Charge > Minimum Late Charge from Rule
Late Charge = Txn Amount – [Txn Amount/(1 + Late Charge %)]
Apply Late Charge Max/Min
The Late Charge Calculation above is algebraically equivalent to this:
Late Charge = (Txn Amount X LC Percentage)/(1 + LC Percentage)

I - The late charge is based on a percentage of the interest due from the interest-paid date up to the due date (does not include FCCBNC). Not valid with payment type 007.

D - The late charge is based on a percentage of the interest due from the interest-paid date up to the current effective date (includes FCCBNC). Not valid with payment type 007.

X - The late charge is based on a percentage of the transaction amount when the transaction amount is less than the scheduled payment amount. The late charge is based on a percentage of the scheduled payment amount when the transaction amount is equal to or greater than the scheduled payment amount. Portico uses the Late Charges Paid To Date field on the Loans - General tab.

S - The late charge is based on a percentage of the loan amount past due. The late charge date from the Loans - General tab is used to determine how many payments are overdue. Escrow is included in the calculation of the loan amount past due when the loan supports escrow.

When the loan due date is not current then the following can occur when a payment is applied:

If the late charge date is less than or equal to the due date, then the partial payment accumulator will be considered when the loan amount past due is calculated.

If the late charge date is greater than the due date, then the partial payment accumulator is not considered when the loan amount past due is calculated.

When using late charge method S and the loan frequency is 0, par accum is always used in the online calculation of the late charge amount. Also, if multiple partial payments are applied online, Portico will always take a late charge due to the late charge date not being advanced. When using late charge method S and the delinquency method is B, the system uses the Late Charges Paid To Date field on the Loans - General tab to calculate the amount past due.

W - The late charge is calculated according to the Wisconsin state criteria. Late charges are calculated as a percentage of the unpaid portion of the overdue payment. Payments made within the grace days of a due date will be applied towards the current payment, then the delinquent payment. Thus, if a partial payment is made on a current payment then the payment becomes delinquent, the late charge will be based on the portion of the payment that has not been applied. The loan maturity date will be used so that no late charge will be calculated and taken for the final loan due date or any payments thereafter. If the loan maturity date is blank for a loan, a late charge will always be calculated if the loan meets the criteria.

When using late charge method W and the delinquency method is B, the system does not use the Loans - Amortization tab to calculate the amount past due or the delinquency amount. When using late charge method W and the loan frequency is 0, a late charge will not be calculated and collected because the loan due date should be equal to the loan maturity date and late charges are calculated and collected on payments applied on or after the maturity date. When the payment amount includes escrow, the late charge will be calculated on the installment portion of the payment (principal and interest amounts) only. Portico will calculate the late fee using the value obtained by subtracting the escrow amount from the payment amount.

To use late charge calculation rule W with a 360-day interest loan type, the loan type must be setup with payment type 007 and calculation method A (assessed late charges).

The valid options supported by Calculation Method A are:

X - The late charge is based on a percentage of the transaction amount when the transaction amount is less than the scheduled payment amount. If the scheduled payment amount includes escrow and the One Late Fee Per Delinquent Payment check box is not selected, the late charge will be based on a percentage of the scheduled payment amount (principal and interest only) when the transaction amount is equal to or greater than the scheduled payment amount. If the One Late Fee Per Delinquent Payment check box is selected, the late charge will be based on a percentage of the scheduled payment amount (principal, interest, and escrow).

S - The late charge is based on a percentage of the loan amount past due.

W - The late charge is calculated according to the Wisconsin state criteria

(Portico Host: 962 Transaction - RULE 1 field)

Rule 2

Indicates if variable late charges are assessed. This field determines the amount used as the base in the late charge calculation. Rule 2 is used to compare late charge calculations only. When rules 1 and 2 are both used, the late charges from the calculations are compared against each other. The late charge selected is then based on the Rule Option field. The valid options are:

N - Option not used. System default.

P - The late charge is based on a percentage of the scheduled payment amount.

A - The late charge is based on a percentage of the transaction amount being applied to the loan.

T - The late charge is based on a percentage of the delinquent amount of the loan. After the late charge is calculated based on the delinquent amount (e.g. 525.80), performs the following checks and calculations:

If Txn Amount – Calculated Late Charge < Late Charge Base
If Calculated Late Charge > Minimum Late Charge from Rule
Late Charge = Txn Amount – [Txn Amount/(1 + Late Charge %)]
Apply Late Charge Max/Min

The Late Charge Calculation above is algebraically equivalent to this:

Late Charge = (Txn Amount X LC Percentage)/(1 + LC Percentage)
Or
LC = Tp/(1 + p)

So as applied to this specific example: Late Charge = (525.80 X 0.05)/(1 + 0.05) = 26.29/1.05 = 25.04.

I - The late charge is based on a percentage of the interest due from the interest-paid date up to the due date (does not include FCCBNC).

D - The late charge is based on a percentage of the interest due from the interest-paid date up to the current effective date (includes FCCBNC).

This option is not valid with Calculation Method A or payment type 007 loans.

(Portico Host: 962 Transaction - RULE 2 field)