Management fees

Management fees

Finance companies can choose from 3 different management fee structures namely:

Servicing Fees

  1. Charged to the borrower and added to the interest rate supplied to the borrower. Example the investors bid at a rate of 10%, the servicing fee is 1%, the borrower pays 11%
  2. Amortised against the finance agreement exactly the same way the investors payments are amortised.

 

RM (receivables management) Fees

  1. Charged to the investor. Example the investors bid at a rate of 10%, the RM fee is 1%, the borrower pays 10%, the investors receive 9%.
  2. The RM fee rate will not be added to the listing / application rate total interest rate.
  3. The receivables management fee is calculated as follows
    1. RM fee is accrued daily as outstanding balance of the investment multiplied by RM fee percentage divided by 365 days.
    2. RM fee can never be more than the unpaid interest capitalised on an investment.
    3. An unpaid RM balance will be kept, so that the correct amount can be claimed against any paid interest capitalised on any future payments. This will result in an accurate charging of RM fees all the way to final settlement even if payments are early or late.
    4. Will be capitalised against an account and visible to the investors only when a payment is received from the borrower. The investment account will reflect the receipt of the payment
    5. On clearance, transfer of the payment received will occur to the investor fund account. However the transfer will be payment received less RM fee (The RM fee rate saved against the finance agreement + The “management fee spread rate” that exists against the investment). The RM fee is transferred to a new RM fee control account. 

 

 Management Fee

  1. Charged to the investor. Example the investors bid at a rate of 10%, the Management fee is 1%, the borrower pays 10%, the investors receive 9%
  2. The Management fee rate will not be added to the listing / application rate total interest rate
  3. The management fee is calculated as follows
    1. Management fee is accrued daily as outstanding balance plus accrued interest of the investment multiplied by Management fee percentage divided by 365 days 
    2. Management fee can never be more than the unpaid interest capitalised on an investment.
    3. An unpaid Management balance will be kept, so that the correct amount can be claimed against any paid interest capitalised on any future payments. This will result in an accurate charging of Management fees all the way to final settlement even if payments are early or late.
    4. Will be capitalised against an account and visible to the investors only when a payment is received from the borrower and cleared. The investment account will reflect the receipt of the payment
    5. ​On clearance, transfer of the payment received will occur to the investor fund account. However the transfer will be payment received less management fee (The Management fee rate saved against the finance agreement + The “management fee spread rate” that exists against the investment). The Management fee amount will be transferred to a Management fee control account.

The actual fee tables that contain the fee rates per credit rating / grade are defined in management fee tables. See this article for how to setup the management fee tables.

Once the management fee tables are defined they are linked to an originator group product via the fees business rule. See this article on how to activate / link a management fee table.

It is possible to override the management fee rates. Overrides can be done at two levels, namely
  1. Investment Category 
  2. Investor
If an override is paced at investments category level then the override rate will be applied to all investors that fall under the investment category.
If an override is done at investor level then only that investor will have the override rate applied.
See this article for details on how to create management fee spreads / overrides



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