Appendix D :Account Acceleration

D.1 Introduction

Account Acceleration is a provision that allows a lender to insist a borrower to repay all or a part of an outstanding loan prior to the scheduled maturity date, when the borrower is identified to be fraudulent. An acceleration clause outlines the probable reason(s) for the lender to accelerate a loan account and demand loan repayment.

Accordingly in OFSLL, a fraudulent account can be accelerated by moving the maturity date up to the date of the demand for full payment which can either be the current date or a back date, but not a future date. In case of a back dated acceleration, back date cannot be scheduled beyond the ‘contract date' or 'account back date’ whichever is higher. Reversal of an account acceleration is also allowed to reinstate the account to its previous status.

The chapter contains the following sections:

Example to illustrate:

D.2 Posting Account Acceleration

Like any other monetary transaction, even the Account Acceleration transaction can be posted on the required account from the Customer Service > Maintenance screen. For detailed information on posting this transaction, refer to Appendix: Transaction Parameters > Monetary Transactions > Account Acceleration section.

Pre-defined validations for account acceleration

While posting the account acceleration transaction, system validates the account status with the following pre-defined validations before proceeding with the transaction:

Account Status / Transaction Description

Validations before posting transaction

Validations after posting transaction

Comments

EXTENSION

No

Should not repost after reversal

 

EXTENSION OVERRIDE

No

Should not repost after reversal

 

INDEX / MARGIN RATE CHANGE

No

Should not repost after reversal

 

CHANGE TERM

No

Should not repost after reversal

 

CHANGE BALLOON

No

Should not repost after reversal

 

CHANGE PAYMENT AMOUNT

No

Should not repost after reversal

 

DELAY FEE

No

Should not repost after reversal

 

CHANGE PROFIT RATE

No

Should not repost after reversal

 

RESCHEDULE PAYMENT

No

Should not repost after reversal

 

RESCHEDULE RATE

No

Should not repost after reversal

 

RESCHEDULE PRE-COM­PUTE LOAN TO INTER­EST BEARING LOAN

No

Should not repost after reversal

 

Errors during account acceleration

Account acceleration is supported for accounts with 'ACTIVE' status. In case account acceleration transaction is posted on accounts with any other status or if there are any other pre-existing conditions posted on the account, system does not allow to post the transaction and displays an error. The table below lists the type of errors displayed and reason for the same.

Error Message

Reason

‘Account Acceleration allowed only for Active accounts’

The status of the account is other than 'ACTIVE'.

‘Account Acceleration already posted on account’

There is already an account acceleration trans­action posted on account.

‘Account Acceleration is not allowed on Non Performing Account.’

There is already a 'Non-Accrual' condition posted on account (i.e., Non Performing Indicator = Y).

‘Account Acceleration not allowed as Stop Accrual is active on account’

There is already a 'Stop Accrual' condition posted on account.

‘Balance Adjustment Method applicable for Pre-Compute account’

The ‘Balance Adjustment’ method is selected for non-pre compute account since its applicable only for pre-compute accounts.

Account changes post account acceleration

On successfully posting the account acceleration transaction, following are the account level changes:

Transaction posting for account acceleration

Depending up on the type of loan account (i.e. pre-compute and non pre-compute), the account acceleration transaction is internally categorized and processed either in single stage or two stages.

Refer to examples included in below section for details on how account acceleration is posted with ‘Principle First’ adjustment and ‘Interest First’ adjustment.

D.3 Reversing Account Acceleration

Reversal of an account acceleration can be done to reinstate the account to its previous status. During reversal of an account acceleration, all the related transactions posted are reversed. For example, ‘RESCHEDULE_PC2SI’ is reversed in case of pre-compute accounts.

Refer to examples included in below section for details on how transactions are posted during reversal of an account acceleration.

D.3.1 Account Acceleration and Reversal with ‘Principle First’ adjustment

Consider a loan account with following details:

Balances before 'Account Acceleration' for a 'Pre-Compute' loan.

 

Posted

Paid

Waived

Adjusted

Balance

ADV/INT

(Pre-compute)

12300

(12000 + 300)

 

 

 

11900

Acceleration Transaction (PC 2 SI)

Principal Adjustment - Minus Transaction

With Interest Estimated Amount = 300

Interest Adjustment - Plus Transaction

Estimated Interest - Rebate = 300-90 = 210

On posting of 'Acceleration Txn' following transactions would be posted on account:

Balances after posting 'Acceleration' transaction.

 

Posted

Paid

Waived

Adjusted

Balance

ADV

11900

0

0

Principle adjust­ment minus = 300

11600

ADV/ INT (Pre-compute)

12300

490

(400 + 90)

0

0

0

INT

0

0

0

Interest adjust­ment plus = 210

210

Since payment is received after acceleration (i.e. same day), there is no additional interest accrual).

In case payment is received of $350 subsequently on account acceleration (Interest adjustment spread).

 

Posted

Paid

Waived

Adjusted

Balance

ADV

11900

140

0

-300

11460

ADV/ INT (Pre-compute)

12300

490

(400 + 90)

0

0

0

INT

0

210

0

210

0

Reversal of Account Acceleration after above Payment posting

Transactions are reversed / posted on account automatically.

Balances after reversal

 

Posted

Paid

Waived

Adjusted

Balance

ADV/INT

(Pre-compute)

12300

750

(400 + 350)

0

0

11550

D.3.2 Account Acceleration and Reversal with ‘Interest First’ adjustment

Consider a loan account with following details:

Balances before 'Account Acceleration' for a 'Pre-Compute' loan.

 

Posted

Paid

Waived

Adjusted

Balance

ADV/INT

(Pre-compute)

12300

(12000 + 300)

500

0

0

11800

Acceleration Transaction (PC 2 SI)

Principal Adjustment - Minus Transaction

If 'Paid Principal Balance' > Estimated Interest - Rebate
Pass 'rebate' amount
Else
Post transaction with ‘Estimated Interest’ Amount

Interest Adjustment - Plus Transaction

If Paid principal > Interest Estimated - Rebate
Pass 0
Else
Estimated Interest - Rebate - Posted = 300 -100 -100 = 100

On posting of 'Acceleration Txn' following transactions would be posted on account:

Balances after posting 'Acceleration' transaction

 

Posted

Paid

Waived

Adjusted

Balance

ADV

11800

0

 

Principal Adjust­ment Minus = 100

11700

INT

0

0

 

Interest Adjust­ment Plus = 0

0

ADV/ INT (Pre-compute)

12300

500+Rebate Amount (100)

12300 - (500+100)

0

0

Since payment is received after acceleration (i.e. same day), there is no additional interest accrual).

In case payment is received of $350 subsequently on account acceleration (Principal adjustment spread)

 

Posted

Paid

Waived

Adjusted

Balance

ADV

11800

350

0

-100

11350

ADV/ INT (Pre-compute)

12300

500+Rebate Amount (100)

12300 - (500+100)

0

0

INT

0

0

0

0

0

Reversal of Account Acceleration after above Payment posting

Transactions are reversed / posted on account automatically.

Balances after reversal

 

Posted

Paid

Waived

Adjusted

Balance

ADV/ INT (Pre-compute)

12300

850

(500 + 350)

0

0

11450