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Refund Rules |
  
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Navigation: Loans > Loan Screens > Account Information Screen Group > Precomputed Loans Screen > Options field group >
Refund Rules
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Refund Rules |
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A Refund Rule is the rule that is applied at payoff to determine the amount of refund. The system will not allow an interest refund to be more than the Original Unearned Interest amount.
Available refund methods are as follows:
Method |
Description |
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01 |
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02 |
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03 |
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04 |
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05 |
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06 |
This rule uses the following formula to calculate the interest rebate:
Amount of daily interest = ((amount financed (OTAFIN) x rate (LNRATE)) / 360) x number of days from the opened date (LNOPND) to the payoff date using a 360-day base Interest refund = original unearned interest (LN78OI) + extension interest (OTXINT) - amount of daily interest
The daily interest rule will only apply if the payoff date is less than or equal to the date opened (LNOPND) plus the number of days in the Refund Within # Days field. If the payoff date is greater than the date opened plus the number of days in the Refund Within # Days field, then interest will be refunded using the Int Rebate Method.
If a loan pays off prior to the first due date, the interest rebate is calculated as follows:
Interest rebate computed as of first due date
Original interest (LN78OI) - interest rebate computed as of first due date = interest earned
Interest earned / 30 x # of days from payoff date to first due date
Interest rebate computed as of first due date + interest from payoff date to first due date = interest refund
Example of Pro Rate:
Interest: 1684.94
First due date: 4/10/11
Payoff date: 3/15/11
Date opened: 2/25/11
Term: 31
Elapsed: 1
(1684.94 x (30 x 31)) / (31 x 32) = 1579.63 interest rebate computed as of first due date
1684.94 - 1579.63 = 105.31
4/10/11 - 3/15/11 = 26 days
105.31 / 30 x 26 = 91.27 interest refund for days between 3/15/05 and 4/10/05
1579.63 + 91.27 = 1670.90 interest refund
This rule is used in connection with the Refund Within # Days field. If this rule is used, the full original interest (LN78OI) will be refunded at payoff if the payoff date is less than or equal to the number of days in the Refund Within # Days field plus the Date Opened (LNOPND).
04 – Extension Interest 1st Due
If the account pays off before the first due date (LN1DUE), then refund all extension interest (OTXINT) in addition to the normal interest refund calculation. If the account pays off on or after the first due date (LN1DUE), do not refund any of the extension interest (OTXINT—pulled from GOLDTrak PC). Refund the original interest (LN78OI) as normal based on the refund method, ignoring extension interest amount.
The Pro-Rata Renewal Actuarial refund calculation is for precomputed interest loans. The account must be a renewal (the Renewal/ProRate field is checked on the Loans > Payoff screen). The steps in calculating the refund are given below. Some of the steps will refer to Microsoft Excel® formulas. Excel is not used by the host computer, but the formula is shown to simplify the information for the calculation that the host performs.
The following loan fields are used by this calculation:
Payment Method (LNPMTH)
Date Opened (LNOPND)
First Due Date (LN1DUE)
Original Interest (LN78OI)
Refund Rule (MRRULE)
Renewal Days (MRWDYS)
Original Maturity (MLOMAT)
Payoff date (PODATE)
Loan Renewal (PORNWL)
Extension Interest (OTXINT)
The calculation steps are as follows:
1.The loan must be a precomputed interest loan and must be renewing (the Renewal/ProRate field is checked on the Loans > Payoff screen).
2.The date opened (ODAYS) plus the renewal days is calculated. LNOPND + MRWDYS
•The loan is not processed if the resulting date is less than the payoff date (PODATE). Generally, all precomputed interest is refunded with the Refund Within # Days.
3.The original term of the loan, in days, is calculated from the Date Opened to the Original Maturity Date (MLOMAT).
4.The elapsed term (EDAYS), in days, is calculated from Date Opened (LNOPND) to the Payoff date.
5.A factor (FACTOR) of the remaining days as a percentage of the original days is calculated by:
FACTOR = (ODAYS – EDAYS) / ODAYS
6.The extension interest (OTXINT) is subtracted from the original interest (LN78OI) if payoff is occurring prior to the first due date (LN1DUE).
7.The rebate/refund is calculated by: REBATE = LN78OI * FACTOR
8.OTXINT is added back to the rebate if payoff was before LN1DUE.
REBATE = REBATE + OTXINT
06 – Refund All Less Acquisition Fee
Refund Rule 6 (Refund All Less Acquisition Fee) will subtract the acquisition fee from the original interest prior to calculating a refund during the Refund All period (which includes the loan open date), in addition to subtracting it from the original interest prior to calculating a refund when the account is outside the Refund All period.
Example:
Refund period = 10 days (MRWDYS)
Acquisition Fee = 20.00 (LN78AA)
Acquisition Code = 1 (LN78AC)
Original Interest = 500.00 (LN78OI)
Start Date = 08-01-08
Refund Date = 08-02-08
Refund Amount = 480.00