Overview of arrears management

Overview of arrears management

Arrears consists of the following elements 

  1. arrears statuses
  2. arrears pools
  3. arrears age bands
  4. arrears letters
  5. arrears fees
  6. arrears collectors
The above elements are all determined and calculated using the number of days a finance agreement is in arrears, known as days in arrears. A simple summary explanation of how days in arrears is calculated:
  1. Days in arrears increases when an instalment is missed i.e. not paid.
  2. Days in arrears decreases when a payment is made.

Summary
The platform automatically assigns the arrears elements i.e.

  1. The arrears status is the first thing assigned. When a finance agreement goes into arrears the default, “into arrears” status is assigned. When a finance agreement goes out of arrears the default, “out of arrears” status is assigned
  2. The arrears age band is assigned and this is based on the days in arrears. (When the age bands are setup they are setup with start and end values for the days in arrears)
  3. The arrears pool is then assigned based on the age band. (When age bands are setup the associated arrears pool is assigned)
  4. The arrears collector is assigned to the finance agreement based on the arrears pool and the percentage work load the collector can handle as setup when creating the arrears collectors
  5. The arrears letters are then generated based on the days in arrears (When the arrears letters are setup the days in arrears is defined for the letter)
  6. The arrears fees are charged based on the letter sent (Arrears fees and rules are created against an arrears letter)

 

Users then have the ability to manually override arrears elements against a finance agreement

  1. The arrears status can be changed. (If this is changed to an arrears status that is not assigned to an arrears letter then the arrears letter will not be generated and the associates arrears fees will not be charged)
  2. An additional arrears fee can be charged
  3. The arrears pool can be changed (When changing an expiry date is supplied and the pool will remain to what has been changed until the expiry date. Once expired the pool will be changed as per the current arrears position as explained above in the automatic assigning of arrears. 3 above)
  4. The arrears collector can be changed
  5. Arrears can be deferred by a specific number of days for a specific period. So for example you defer an account by 20 days for the next 3 months. So in the next 3 months 20 days will be subtracted off the days in arrears and all arrears elements as explained above will work off the adjusted value. Once the expiry period is met the days in arrears will return to the true current arrears position.

Additional Detail
Arrears bands are used to define the number of days a finance agreement is in arrears. Each age band is assigned to an arrears pool. There is normally a one to one relationship between arrears age bands and arrears pools but it is possible to have more than one age band assigned to the same arrears pool.

 

When a finance agreement goes into arrears, both arrears documents and arrears fees can be generated against the finance agreement. The setup and definition of the documents and fees is done through “arrears letter processing”.





Each arrears letter / document will only be sent, and the corresponding fee charged, if

  • The arrears days indicated on the letter has been reached.
  • All pre requisite documents (if any) have been generated
  • If an arrears status is attached to the letter, then if and only if the finance agreement has an arrears status equal to than defined in the letter. This allows the finance company to change the arrears status and prevent arrears documents and fees being automatically generated.
  • If the arrears cycle is correct as per what has been defined for the letter (see explanation below)
  • An active promise to pay payment arrangement does not exist against the finance agreement
  • The amount in arrears is greater than the tolerance amount set in the arrears letter.

 

When a finance agreement goes into arrears it is assigned to an age band depending on the number of days it is in arrears. The finance agreement is then allocated to the relevant arrears pool which is then worked on by an arrears collector.




The assigning of the arrears age bands, the arrears pools and the arrears status to a finance agreement all happens automatically within the platform. Users do however have the option of overriding or modifying these arrears settings on a specific finance agreement by do the following within a finance agreement:

  1. Manually add fees, examples of fees that can be manually added to a finance agreement
    1. Collection fees
    2. Dishonor fees
    3. Late Payment Fees
    4. Overdue Fees
  2. Change the arrears collector
  3. Change the arrears status
  4. Change the Arrears pool
  5. Defer arrears




    • Related Articles

    • Arrears fees against arrears letter / documents

      Arrears fees are charged automatically to a finance agreement when an arrears document is generated. The fee charged can be different depending on the amount in arrears. Fees are defined against each arrears letter/document and is tiered by amount in ...

    • Add an arrears pool

      Arrears pools are defined at finance company and product level which will allow different finance companies to have different arrears settings for different products. Arrears pools are used to group together or categorise finance agreements that are ...

    • Add an arrears collector

      The arrears collectors are defined at finance company and product level. This caters for the scenario where arrears collectors specialise in specific products.  See this article for an overview of arrears management. 1. To add a new arrears collector ...

    • Add an arrears status

      Finance companies can define all the arrears statuses that they would like to use during their arrears management.  See this article for an overview of arrears management. 1. To add a new arrears status, navigate to Home Pages -> Arrears Management  ...

    • Arrears letters / document templates

      Once you have created an arrears letter process, then the next step will be to add arrears letters / document templates.  The arrears letters are the actual arrears documents that will be generated when a finance agreement goes into arrears.    See ...