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:

• Posting Account Acceleration
• Reversing Account Acceleration

Example to illustrate:

• Account Acceleration and Reversal with ‘Principle First’ adjustment
• Account Acceleration and Reversal with ‘Interest First’ adjustment

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:

• The acceleration effective date will be the new maturity date of the account since the original maturity date of the account is moved to either the current date or a back date.
• On an accelerated account, the periodic billing, normal interest accrual and late fee assessment is discontinued as per the standard functionality since maturity date is reached.
• From the acceleration effective date, post maturity interest accrual with corresponding post maturity interest rate is calculated and added to the total account dues as per normal processing when a monetary transaction is posted.
• For a back dated account acceleration, all the system posted transactions on the account (like billing, interest, and late fees) between acceleration date (i.e. back date) and current system date is reversed, re-calculated and re-posted based on new maturity date (i.e. acceleration date).
  • Also the interest already accrued on the account based on the normal interest rate is reversed from acceleration date (i.e. back date) up to current system date and is re-calculated with post maturity interest rate and re-posted for the same period.

• For SCRA accounts, if the borrower status is 'OFF MILITARY DUTY' during the acceleration period, then the post maturity interest rate is changed to normal interest rate for that period. In case the post maturity rate is less than standard SCRA rate (i.e. 6%), then the same is set as standard interest rate for the account.
• For an accelerated account the following account attributes are displayed in the ‘Result' section:
  • Total Accelerated Payment Due Amount
  • Acceleration Effective Date
  • New Maturity Date
  • Post Maturity Interest Rate

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.

• For ‘Non Pre-Compute’ accounts the transaction is posted directly.
• For ‘Pre-Compute’ accounts, the account is first converted from pre-compute to interest bearing account by internally posting the monetary transaction ‘RESCHEDULE_PC2SI’ (RESCHEDULE PRE-COMPUTE LOAN TO SIMPLE INTEREST LOAN) based on the following parameter values:
  • Transaction Date: Specified acceleration date
  • Reschedule payment start date: Next payment date as per the existing due date history.
  • Amount: Outstanding balance under ADVANCE/PRINCIPAL balance component.
  • Rate: Existing normal interest rate of the account.
  • Term: Calculated for the remaining term (i.e. cycles not yet billed). Term is not relevant for account acceleration since maturity date is moved to transaction date.
  • Rebate on finance and insurance charges is processed as per the normal PC2SI transaction.

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:

• Contract Date = 01. Jan 2017
• Contract Maturity Date = 31.Dec 2017
• Rate = 4.99%
• Term = 12 Months

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)

• Txn Date = 16.Aug. 2017
• Reschedule St Dt = 01.Sep. 2017
• Amount = 11900
• Rate = 4.99
• Term = 1

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:

• Txn 1 - PC 2SI (with about values) = 0
• Txn 2 - Interest Rebate = 90$(Assumed number) - Pass 11900 for rebate calculation
• Txn 3 - New Principal Adjustment Txn = Outstanding Principal = 11900
• Txn 4 - Post 'Principal Adjustment minus = 300
• Txn 5 - Post 'Interest Adjustment Plus = 210

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.

• Reverse Txn 6 - Payment of $350
• Reverse Txn 5 - Interest Adjustment Plus = 210
• Reverse Txn 4 - Principal Adjustment minus = 300
• Reverse Txn 3 - New Principal Adjustment Txn
• Reverse Txn 2- Interest Rebate
• Reverse Txn 1- PC 2 SI
• Re-post - Txn 6 - Payment

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:

• Contract Date = 01. Jan 2017
• Contract Maturity Date = 31.Dec 2017
• Rate = 4.99%
• Term = 12 Months

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)

• Txn Date = 16.Aug. 2017
• Reschedule St Dt = 01.Sep. 2017
• Amount = 11800
• Rate = 4.99
• Term = 1

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:

• Txn 1 - PC 2SI (with about values) = 0
• Txn 2 - Interest Rebate = $100 (Assumed number) - Pass 11800 for rebate calculation
• Txn 3 - New Principal Adjustment Txn = Outstanding Principal = 11800
• Txn 4 - Post 'Principal Adjustment minus = 100
• Txn 5 - Post 'Interest Adjustment Plus = 100

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.

• Reverse Txn 6 - Payment Txn
• Reverse Txn 5 - Interest Adjustment Plus = 100
• Reverse Txn 4 - Principal Adjustment minus = 100
• Reverse Txn 3 - New Principal Adjustment Txn
• Reverse Txn 2 - Interest Rebate
• Reverse Txn 1 - PC 2SI (with about values) = 0
• Re-post - Txn 6 - Payment

Balances after reversal

	Posted	Paid	Waived	Adjusted	Balance
ADV/ INT (Pre-compute)	12300	850 (500 + 350)	0	0	11450