Collapse All Expand All

This topic provides Recovery users and system administrators with an overview of the recovery process as well as the components that make up the recovery lifecycle. This topic contains the following information:

• System Administrator Configurations
• Charging Off an Account
  • Charge-Off Workflow
    • Recommend for Charge-Off Workflow Step
    • Recommendation Approval Workflow Step
    • Set GL Amounts Workflow Step
    • Charge-Off Account Workflow Step
  • Charge-Off Process
    • Create Charge-Off Records
    • Accounting Rules for Interest Accrual
    • Initial Transaction Processing
• Creating a Repayment Plan
• Transactions
• Finalizing a Recovery Account

System Administrator Configurations

Prior to allowing users to work in the Recovery module, many configurations must be made by system administrators to ensure the financial institution is working with all of the powerful functionality the module provides.

The necessary configurations include:

• Activating the Recovery modules in the database

Please contact Temenos for assistance with turning on the modules in the database.

• Granting users permission to the Recovery features in System Management > Users and/or System Management > Groups > Security Groups.
• Configuring the following General Ledger items:
  • GL Offsets
  • GL Accounts
  • GL Segment Mappings
• Configuring Transaction Codes
• Configuring Interest Rates
• If desired, configuring Charge Off Events

^ Back to Top

Charging Off an Account

The first step in the recovery process is charging off an account. When a debt is unlikely to be collected, a financial institution may elect to charge off an account to take the delinquent account off of the financial institution's books. The charge-off process is accomplished through execution of a workflow containing multiple charge-off steps.

Prior to charging off an account, required information is captured through pre-charge-off workflow steps. Once this information is gathered, an account can be approved for charge-off and the charge-off process can be initialized. 

The charge-off process occurs when an account is approved from either the System Management > Recovery > Recovery Approval screen or the Charge-Off Account workflow step. The pre charge-off and the charge-off processes are outlined as follows:

Charge-Off Workflow

Charge-off workflow steps may be configured in individual workflows or combined into one charge-off workflow. Below is an example of a charge-off workflow that has been configured to include all charge-off workflow steps:

Recommend for Charge-Off Workflow Step

The Recommend for Charge-Off workflow step is used to submit an account for charge-off review. This is the first step that executes when accounts are determined to be uncollectable.

The Recommend for Charge-Off workflow step contains the following fields to capture the information required to initialize the charge-off process for an account:

Field	Description
Charge Off Type	From the drop-down, identify whether the account is being recommended for a full or partial charge-off. This drop-down is only displayed if the PARTIAL_CHARGE_OFF_PROCESS solution parameter is activated in System Management > Modules > Recovery.
Charge Off Amount	Displays the amount of the charge-off. If the Charge Off Type is Full, the account balance prepopulates within the Charge Off Amount field and is read-only. If the Charge Off Type is Partial, the Charge Off Amount field is enabled and the amount of the charge-off must be provided. If the account is being recommended for a Partial charge-off, the system validates the following Charge Off Amount attributes upon clicking : Amount may not exceed the account balance. Amount may not be the full balance of the account. Amount may not be zero or left blank. If any validation fails, an error is received and the amount must be updated prior to advancing to the next step.
Reason for Charge Off	Enter the reason the account is being recommended for charge-off.

Once all fields are complete, clicking saves the information entered within the workflow step, validates the charge-off amount, and activates the next step in the workflow.

Recommendation Approval Workflow Step

The Recommendation Approval workflow step is used to approve an account that has been recommended for charge-off. This is a required step in the charge-off process providing an opportunity for additional review of an account prior to being charged-off.

During the charge-off initialization process, the Recommendation Approval workflow step contains the same required fields as the Recommend Account for Charge Off step. This is a decision step that can drive the workflow down different paths, depending on whether the recommendation is approved or rejected.

Once the charge-off information is reviewed, clicking  submits the account for final charge-off review and advances the workflow to the next appropriate step.

If the account does not meet the requirements to be charged off, clicking  cancels the charge-off and advances the workflow to the next appropriate step.

Set GL and Balance Workflow Step

The General Ledger (GL) accounts that are to receive the charged off amount must be identified. This can be accomplished within the information section and GL Allocation grid available in the Set GL and Balance workflow step.

The information section of the Set GL and Balance Workflow Step includes the following fields:

Field	Description
Charge Off Date	Displays the date of the charge-off.
Recommended By	Displays the name of the user who recommended the account for charge-off.
Charge Off Amount	Displays the amount that has been recommended for charge-off.
Total Amount From Grid	Displays the amount currently distributed to the GL accounts in the GL Allocation grid.
Remaining Amount	Displays the difference between the Charge Off Amount and the Total Amount From Grid. This amount must be zero or an error is received upon clicking .

The GL Allocation grid distributes the amount being charged off to the General Ledger in the Recovery module. Once the charge-off is approved and the charge-off process runs, the initial balances for the recovery account are set according to this grid.

To include additional GL accounts in allocations, click  and select a GL account from the GL Accounts window.

When a GL account has been selected, click . The GL Allocation grid displayed within the Set GL and Balance workflow step is updated to include the new GL account. Click  to close the GL Accounts window once all accounts have been added. 

Charge-Off Account Workflow Step

The Charge-Off Account workflow step accepts the charge-off information for an account that was recommended and approved for charge-off.

The Charge-Off Account workflow step contains the information used during the charge-off process to create account records within the Recovery module. The Charge-Off Account workflow step contains the following fields:

Field	Description
Charge Off Date	Displays the date that the account is to be charged off. By default, the current date is displayed, but can be changed by clicking and selecting a new date from the calendar that appears. Changing the Charge Off Date may effect interest calculations.
Charge Off Type	Displays the Charge Off Type. By default, the Charge Off Type that has been recommended and approved displays.
Charge Off Amount	Displays the Charge Off Amount that has been recommended and approved. If the Charge Off Type is Full, this field is read-only.
Interest Rate Type	Displays the interest rate type being applied to the account. If there is an existing interest rate on the account, the Interest Rate Type defaults to Fixed. To update the Interest Rate Type to a variable interest rate different from the default rate, select an option from the drop-down list. The Variable Interest options in the Interest Rate Type drop-down are configured in System Management > Recovery > Interest Administration.
Interest Rate	If the Interest Rate Type is Fixed, the Interest Rate field is editable and displays the Interest Rate saved in the Account > Account Information > Principal and Interest > Interest Rate field. An interest rate value of up to six decimal places can be entered within the Interest Rate field. If the Interest Rate Type is a value other than Fixed, the Interest Rate field is blank and read-only. The Interest Rate is then determined by the configurations made within System Management > Recovery > Interest Rate.
Adjustment	If a variable Interest Rate Type is selected, this field is enabled to allow the Interest Rate to be adjusted. Enter the rate at which interest is to be adjusted beyond the interest rate type. For example, if the variable rate of interest to be accrued is Prime + 1%, after Prime is selected for the Interest Rate Type, a value of 1.00 is entered for Adjustment.
Collectability Status Code	From the drop-down, assign a collectability status to the account being charged off. The Collectability Status is available for queuing logic enabling a financial institution to build Recovery queues based on the likelihood of a debt being collected. The Collectability Status Code is a lookup field configured in the System Lookup tab of the System Management > Field Configurations page.
Reasons for Charge Off	Displays the reason for the charge-off defined during the Recommend for Charge Off and Recommendation Approval steps. This field is editable.

Once the charge-off fields have been reviewed, clicking is the final opportunity to reject the charge-off. Clicking confirms the account is being charged off and initializes the charge-off process. If configured, the Post Charge Off Event is automatically triggered when the charge off process completes and the account in context is moved from the Collection module to the Recovery module. When this event occurs, Recovery account fields are set in order to support Metro 2 Credit Reporting. For example, rules can be authored that execute when the Post Charge Off Event is triggered to set an Account field on the Recovery account, such as Credit Reporting Identification Number, Credit Reporting Account Type, Payment History Profile, or Date of First Delinquency, to populate with information required for Metro 2 credit reporting.

^ Back to Top

Charge-Off Process

The charge-off process is initialized through completion of the Charge Off Account workflow step or through the System Management > Recovery > Recovery Approval page. When an account is approved for charge-off, the existing account data captured through the Charge Off workflow transfers to the Recovery solution and is available for screens, queues, views, reports, and repayment plans. The charge-off process consists of the below steps:

1. A new recovery account record is created in the database.
2. Accounting Rules are used to determine the amount of interest accrued on an account.
3. The initial transaction is processed creating the first general ledger entries for the new recovery account.

Create Charge-Off Records

When an account is charged off, a record is created in the database with the initial recovery account information. The following fields are updated when a new record is created:

Recovery Field	Description
Is Fully Charged Off	A flag field that is set if the account is fully charged off. If the account is partially charged off, this flag is not set.
Initial Balance	The initial balance is the amount that has been charged off. This amount reflects the sum of the initial Principal, Interest, Reimbursable Expense, Non Reimbursable Expense and Non Reimbursable Other amounts.
Initial Principal	The amount allocated to Principal GL Accounts in the Set Balances workflow step.
Initial Interest	The amount allocated to Interest GL Accounts in the Set Balances workflow step.
Initial Reimbursable Expense	The amount allocated to Reimbursable Expense GL Accounts in the Set Balances workflow step.
Initial Reimbursable Other	The amount allocated to Reimbursable Other GL Accounts in the Set Balances workflow step.
Initial Non Reimbursable Expense	The amount allocated to Non Reimbursable Expense GL Accounts in the Set Balances workflow step.
Initial Non Reimbursable Other	The amount allocated to Non Reimbursable Other GL Accounts in the Set Balances workflow step.
Collectability Status Id	The Id of the Collectability Status that has been assigned during the pre-charge-off process.
Created By Id	The User Id of the person that created the recovery account.
Modified Date	The date of the most recent modification to the recovery account.
Modified By Id	The User Id of the person that last modified the recovery account.
Charge Off Date	The Charge Off Date identified during the pre-charge-off process.
Payment History Profile	The value that indicates the payment history for an account in Recovery. This value changes each month to reflect the most up-to-date payment history for an account. This field does not exceed 24 characters. The values in this field reflect the following: Value Description 0 Indicates that 0 payments were past due on an account for that month; therefore, the account was current. 1 Indicates that the account was 30-59 days past due for that month. 2 Indicates that the account was 60-89 days past due for that month. 3 Indicates that the account was 90-119 days past due for that month. 4 Indicates that the account was 120-149 days past due for that month. 5 Indicates that the account was 150-179 days past due for that month. 6 Indicates that the account was 180 or more days past due for that month. B Indicates that no payment history is available prior to that month, either because the account was not open or because the payment history could not be furnished. "B" cannot be preceded by other values. For example, if there are three values within the Payment History Profile field, the field cannot read "B12," as that indicates that there is no history prior to this month but that the previous month was 60-89 days late. D Indicates that no payment history is available for that month. E Indicates a zero balance; therefore, the account is current that month. G Indicates that the account is in collection. H Indicates that foreclosure has completed. J Indicates that voluntary surrender has occurred. K Indicates that repossession has occurred. L Indicates that the account was charged off. When a Metro 2 export runs, the Lifecycle Management Suite determines the last time that the data on a Recovery account was updated. If a month has passed based on the LAST_CREDIT_REPORT_EXPORT_DATE parameter within the database, the right-most character is removed from the Payment History Profile value and a new left-most character is added.

Accounting Rules for Interest Accrual

Accounting rules are used to determine the daily amount of interest accrued based on the interest rate assigned to the account during the pre-charge-off process. Please see the Interest Accrual topic of the Administrator Guide for more information on interest accrual. Please see the Recovery Account and Repayment Plan Interest Rates Panels topic of the User Guide for more information on interest accrual. 

Initial Transaction Processing

Initial transaction processing sets the initial balances allocated during the Set GL Amounts workflow step. Once the charge-off process completes, the transaction is logged in the recovery account's ledger and can be viewed through the System Management > Recovery > GL Balances and Journal Entries screen or the Transaction panel that may be assigned to an account screen.

^ Back to Top

Creating a Repayment Plan

After an account is charged off, the next step in the recovery process is to create a repayment plan. A repayment plan is an agreement made between the debtor and the financial institution in which the debtor agrees to repay the funds that have been charged off.

Please see the Repayment Plans topic of the User Guide for details on all components and processes included in the Recovery solution's repayment plan functionality.

^ Back to Top

Transactions

Throughout the lifecycle of recovery accounts and repayment plans, transactions from debtors can be applied and recorded in the system. The Recovery module provides a powerful yet easy-to-use transaction processing interface that can be accessed at any time for recovery accounts and repayment plans.

For more information on a recovery account's initial charge-off transaction, please reference the Charging Off an Account section of this topic.

For information on standard recovery account and repayment plan transactions, please see the Recovery Transactions topic of the User Guide.

For information on how transactions are processed via batch, please see the Batch Transaction Import topic of the Administrator Guide.

^ Back to Top

Finalizing a Recovery Account or Repayment Plan

The recovery process is completed when an account is paid in full and it has been finalized by a user with the appropriate permissions.

• To finalize a recovery account, click .
• To finalize a repayment plan click, .

Once clicked, validations are performed. If the recovery account or repayment plan passes the validations, the recovery account or repayment is finalized.

^ Back to Top

 

 

---

©2020 Temenos Headquarters SA - all rights reserved.

Send Feedback