AFT Payment on a Loan or LOC Account

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UATTR2-05

AFT Payment on a Loan or LOC Account

3887

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Access this screen if the AFT is for a Loan or LOC account after the second AFT configuration screen (or after the AFT IRA/HSA screen if the from account is of that type.)

Helpful Resources

Visit Show Me the Steps for easy instructions on how to use CU*BASE to complete tasks related to AFTs.

Special Rules on AFT Transfers for 360 Mortgages

Special Rules on AFT Transfers for Online Credit Cards

For outgoing accounts to loans that are "off the books" loans, such as a loan at another credit union, you will not advance to this screen, since special delinquency rules apply for these types of AFTs.  Refer to the Automated Funds/Check Funds Transfer booklet for more information.

Delinquency control

To give the AFT system direction as to how the loan should be paid, the system uses two control fields: Payment Date Control and Delinquency Control. The Payment Date Control flag instructs the system whether or not to consider the due date on the loan when deciding whether or not a transfer needs to be made. The Delinquency Control flag tells the system whether or not to consider the delinquent amount on the loan account when determining a past due amount to be transferred. Explanation of Payment Date Control and Delinquency Control

Combinations of these fields are written in easy to understand language on this screen. Make a selection, then press Enter. The Payment date control and Delinquency Control boxes at the bottom of the screen will be checked or unchecked to indicate the settings for each of the settings. Once you make a selection, press Enter to finalize the selection and move to the original list of AFTs. Enter the account number to view the saved AFT. Further explanation of the Payment Date Control and Delinquency Control Combinations on the screen

The recommended setting is Make this payment every time, no matter whether I’m behind or whether a payment is made via another channel (1). (unchecked for both payment date control and delinquency control setting.) With this selection, the AFT record stands completely independent of the loan account itself, and the system will always try to satisfy the transfer amounts and dates as set up in the AFT. If the AFT is set up properly, this configuration helps to make sure that if the loan gets behind, the AFT system will work to get the loan caught up again, as funds become available. Although this selection is best for most situations, there may be some exceptions for special circumstances.

Explanation of the Payment Date Control and Delinquency Control Combinations

Following are the explanations of the combinations

IMPORTANT: The default setting is Use the default setting configured (0) in the loan category, which uses the settings configured in the Loan Category Configuration. If this field is selected, the setting from the loan category configuration will apply.

Payment Date Control setting*

Delq. Control setting*

Situation

n/a

n/a

Use the defaults settings of the configured loan category (0)

For this selection, the AFT will follow the rules of the configured loan category.

Make this payment every time, no matter whether I’m behind or whether a payment is made via another channel (N/N) (1)

Use this combination if the member wants a specific payment to be made each month, regardless of other activity on the loan account. As described above, these settings allow the AFT to function independently from the loan account, and transfers will be made faithfully each month regardless of other loan payment activity.

If both Payment Date Control and Delinquency Control are unchecked the delinquency problems will eventually be caught up as part of the system's attempt to catch up the past due transfer amounts on the AFT.

Make this payment ONLY if a payment is not made another way (Y/N) (2)

Use this combination if a member wishes the AFT to kick in only when he or she misses a regular payment. These settings ensure the system will only make a transfer when the loan is actually due, because it watches the next due date on the loan to determine whether a transfer is necessary.

  • Note for AFT payments with this option selected:  If the Next Transfer date or Transfer day entered on the second AFT configuration screen makes the AFT next-payment date precede the loan next-payment date, CU*BASE will change this date or day to match the next-payment date of the loan once the AFT record is saved.  This is to honor the spirit of this type of AFT and to allow the member time to make a payment prior to the AFT making the payment. (Hint: When setting up a normal AFT to a loan you can adjust the payment date/delinquency control settings combination on the final AFT configuration screen, then you can go back in and adjust the transfer date if needed.)

  • Note for A2AFT (recurring A2A) payments with this option selected: As described, the system will automatically adjust transfer dates on A2AFT transfers to loan accounts as well. The difference here is that A2AFTs don’t have a mechanism to look at the loan to determine whether to make the payment or not, and they do not attempt to “catch up” if a payment is missed for any reason. When setting up these AFTs you will not be presented with the final AFT configuration screen, since those settings are never used by the A2A posting program.

Make this payment ONLY if a payment is not made another way, and pay enough ahead to catch up my loan completely. (Y/Y) (3)

If Delinquency Control is checked to help catch up seriously delinquent members, it is recommended that Payment Date Control also be checked so that the system watches only the due date on the loan account, and not the next transfer date on the AFT record, especially if the loan account allows it to be paid ahead.

  • Note for AFT payments with this option selected:  If the Next Transfer date or Transfer day entered on the second AFT configuration screen makes the AFT next-payment date precede the loan next-payment date, CU*BASE will change this date or day to match the next-payment date of the loan once the AFT record is saved.  This is to honor the spirit of this type of AFT and to allow the member time to make a payment prior to the AFT making the payment. (Hint: When setting up a normal AFT to a loan you can adjust the payment date/delinquency control settings combination on the final AFT configuration screen, then you can go back in and adjust the transfer date if needed.)

  • Note for A2AFT (recurring A2A) payments with this option selected: As described, the system will automatically adjust transfer dates on A2AFT transfers to loan accounts as well. The difference here is that A2AFTs don’t have a mechanism to look at the loan to determine whether to make the payment or not, and they do not attempt to “catch up” if a payment is missed for any reason. When setting up these AFTs you will not be presented with the final AFT configuration screen, since those settings are never used by the A2A posting program.

  • Important Warning about AFT Controls and the Timing of AFTs and Delinquency Monitoring: If your credit union prefers this combination, the timing of when your daily delinquency monitoring is run and the timing of when AFT processing is done (beginning- or end-of-day) is also important.  Whenever the AFT Delinquency Control setting is checked, the recommended settings are for delinquency monitoring to occur at beginning-of-day and AFTs to run at end-of-day.  This allows for the system to update the loan’s delinquency status before running AFTs the following day.  Otherwise the AFT may not occur until an additional calendar date has passed, which can cause unexpected results when the full payment is not available, especially for loans that have a due date toward the end of the month. 

  • Learn more about system configurations for daily delinquency monitoring and AFT processing

  • Learn more about default AFT settings in Loan Category configuration

Make this payment every time. If the loan becomes delinquent, make transfers every day until the loan is caught up. (This setting is recommended for loans that cannot be paid ahead. (N/Y) (4)

This combination is sometimes mistakenly used in delinquency situations, to force the system to keep attempting transfers according to the AFT record, but try to get just enough money at once to satisfy what is actually delinquent on the loan account.

BE CAREFUL with these settings, especially for loans that allow a member to pay ahead. If a large deposit is made, this may result in one large transfer being made to “catch up” the delinquency amount. However, because the Next Transfer Date was only moved ahead one period, another transfer may be done the very next day to satisfy the next payment due. The due date on the loan and the next transfer date on the AFT will become out of sync, and more transfers may be made than needed to bring the loan current. For example:

Due to insufficient funds available in his transfer account, Fred Jones has missed both his May 16th and June 16th loan payments. On June 17, he was able to deposit a large check into his account. That night, when the system processed automated transfers, one large transfer (the equivalent of the two missed payments) was made to Fred's loan account. However, because only one transfer cycle was actually made, the next transfer date on the AFT record moved ahead only one period to June 16th. The next day, the system performed another transfer to satisfy the June payment, setting the next transfer date to July 16.

While reviewing the account history, the credit union notices that the due date on the loan is not the same as the next transfer date on the AFT record. This is because Fred's loan is set up so that it can be paid ahead, and when the first large transfer was made, the due date on the loan account was actually moved ahead to July 16, and the next day's transfer bumped it yet again to August 16.

To avoid this situation, select Make this payment ahead ONLY if a payment is not made another way, and pay enough to catch my loan up completely (3). See this selection for more information.

Important Warning about AFT Controls and the Timing of AFTs and Delinquency Monitoring: If your credit union prefers this combination, the timing of when your daily delinquency monitoring is run and the timing of when AFT processing is done (beginning- or end-of-day) is also important.  Whenever the AFT Delinquency Control setting is checked, the recommended settings are for delinquency monitoring to occur at beginning-of-day and AFTs to run at end-of-day.  This allows for the system to update the loan’s delinquency status before running AFTs the following day.  Otherwise the AFT may not occur until an additional calendar date has passed, which can cause unexpected results when the full payment is not available, especially for loans that have a due date toward the end of the month. 

 

 

Further Explanation of Payment Date Control and Delinquency Control

Following is a more detailed explanation of Payment Date Control and Delinquency Control. For a simpler explanation of what the combinations of these two flags mean is above this discussion..

Field Descriptions

 

 

 

 

Field Name

Description

Payment date control

This field is used only for transfers to a loan account. Leave the field blank to use the default settings in loan category configuration for this loan type.

The purpose of this flag is to instruct the system which due date to use when deciding whether or not a transfer needs to be made: the due date on the loan account, or the next transfer date on the AFT record.

A setting of checked means that the due date on the loan will always be the deciding factor as to whether or not a transfer must be made.

With this setting, the system will not pay the loan ahead, because it will only make a transfer if a payment is actually due on the loan. (For example, this setting should be checked if a member requests the AFT to take place only if he or she does not make a regular loan payment through other means.)

There are some rules that should be followed when using this setting: Make sure that the Next transfer date is set to the same date as the next due date on the loan, and that the frequency settings also match. In addition, the Transfer Type selected on the first AFT configuration screen should be Make a regular loan payment.

A setting of unchecked means that the next transfer date on the AFT record will be used to determine whether or not a transfer is made.

With this setting, a transfer will be made according to the AFT record even if the member has already made a loan payment through other means, such as a cash payment or via an audio response transfer. (Therefore, if the member wants a specific payment to be made each time a transfer is made, regardless of the loan terms, uncheck this option.

Delinquency control

This field is used only for transfers to a loan account. Leave the field blank to use the default settings in loan category configuration for this loan type.

The purpose of this flag is to tell the system what to do when the loan gets behind due to insufficient funds for transfer.

A setting of checked means that the system will only look at the due date of the loan when deciding how much is past due and should be made up.

With this setting, if sufficient funds become available, the transfer will take enough funds to bring the loan current, which may be the equivalent of several missed loan payments.

A setting of unchecked means the next transfer date on the AFT record will be used to determine how much needs to be made up on the loan.

With this setting, even if the normal transfer is actually above the required loan payment, the system will keep trying to satisfy the amount of transfers that are behind, regardless of whether the loan has been caught up. This setting works best because it essentially works to satisfy both the loan and the AFT at the same time by bringing all past due transfers down to zero.

 

Link to ID: https://help.cubase.org/cubase/cubase.htm#UATTR2-05.htm