Commission Definition Best Practices

The system does not allow you to modify the value of a commission already in use in active contracts. However, the bank may decide to alter its commission values starting next month, so the new values must be entered into the system.

The following instructions show how to edit the value of a commission attached to a banking product with Approved status and having contracts based on that banking product.

1. On the Commission List page, double-click the commission whose value has to be changed. The Edit Commission page is displayed.

2. In the Commission Value section, select the value that is in its validity period and double-click it.

   

3. On the newly displayed Edit Commission Value page, change the date from the Valid To field into the last day when this commission value should be used in contracts.

   

4. Click the Save and Close button.

5. Back in the Commission List page, in the Commission Value section, click the Insert button. The Add Commission Value page is displayed.

6. Complete the fields for the new commission value record, filling in the new Commission Percent or Value. Make sure the date entered in the Valid From field is the next day after the previous commission value is not active anymore. Enter a date further in the future for the Valid To field. Select the Active status for the new commission value record.

   

7. Click the Save and Close button.

8. Back in the Commission List page, in the Commission Value section, observe the newly added commission value, valid starting the next day after the previously existent commission value ends its validity.

   

   Contracts created after the new commission value's Valid From date automatically use the new commission value.

The following sections display examples of the typical definition commissions grouped on their periodicity:

One-time fees are commissions that the bank requires to be paid once and not on a regular basis during the contract's life cycle.

The following example illustrates a one-time fee of 0.02% applied to the paid value of early repayment on contracts. The commission is not included into the repayment schedule of installments, it is not automatically loaded on the contract or mandatory for the applicant:

Periodical commissions are required to be paid on a regular basis during the contract's life cycle, monthly or every 3 months depending on the commission type's defined periodicity. For such commissions, the Is Included Into Repayment Schedule Installment checkbox is automatically selected and the commission is included into the repayment schedule. The repayment schedule template should be provided with a column to place this commission type.

For periodical type commissions, such as commissions with Periodicity Type = Monthly, if you leave the Commission Value Is Percentage checkbox unselected, then the commission values are defined as straight forward values. Make sure that the formula in the repayment schedule template has the following types defined: fixed value, linear, linear on year.

If you select the Commission Value Is Percentage checkbox, then you can select the contract's operation item to which the percentage must be applied. The possible options are those listed in the drop-box next to Commission Percent Applied To field:

• Remaining value - the percentage applies to the contract's remaining to be repaid value .
• Financed value - the percentage applies to the contract's financed value.
• Paid value - the percentage applies to the anticipated payment performed on the contract.
• Unused amount - the percentage applies to the contract's unused amount from the granted value.
• Used amount - the percentage applies to the contract's used amount from the granted value.
• Overdraft limit amount - the percentage applies to the contract's overdraft limit amount.
• Amount - the percentage applies to the contract's amount.

The following example illustrates a monthly 0.15% commission applied to the unused amount of contracts. The commission is included into the repayment schedule of the monthly installments and it is automatically loaded on the contract:

The banks can define commissions for performing certain transactions (events) on contracts.

These commissions can also be defined with straight forward values or as percentages.

The following example illustrates a commission applied to an early repayment contract event. You can see the same commission mentioned as a repayment notification detail after approving the event:

As you see below, when performing an early repayment contract event and on the banking product's commissions list there is a commission with the same type as the commission placed in the event, then the event automatically retrieves the commission from the list defined at the banking product level:

The commission used within the example presented above is defined as follows:

The banks can define commissions to be paid back to the customer when performing Returned Amount or Goods transactions (events) on contracts. A part or the entire amount of Front-End Fees paid by a customer at the contract creation can be paid back to the customer if they choose to return the amount of the loan or the goods in the time frame defined at the banking product level. For term loan or mortgage products, you can specify during banking product definition whether the product accepts Return Amounts or Goods transaction types or not, along with specific conditions, such as the number of days during which this transaction type can be created at the contract level.

The Return Fee type commissions, calculated using the ReturnCommissionFormula banking product formula as sum of all Front-End Fee type commissions with Is Returnable = True)*[(Returned amount)/(Loan amount)], are paid back to the borrower if a Return of Goods transaction is performed.

To set up contracts that allow Return Amounts or Goods transaction, apart from configuring the Return Of Goods section within the banking product's Associated Transactions tab, make sure to define front-end fees with Is Returnable = True and return fees with Is Return = True. Attach the returnable front-end fees and the return fees to the commission list used within the product's Interests&Commissions tab, and select the ReturnCommissionFormula banking product formula within the product's Risk Formulas tab.

Return Fee commission definition example:

Returnable Front-End Fee commission definition example:

Return fee and returnable front-end fee used within a term loan banking product definition:

ReturnCommissionFormula banking product formula used within a term loan banking product definition:

The ReturnCommissionFormula banking product formula was already mapped to the entity holding contract records, thus no more actions are required for its definition. The picture below illustrates the mapping:

At the contract level, the Fees & Commissions section contains the returnable front-end fee, as it was defined with Automatically load on contract = True.

The following example illustrates the return fee commission automatically calculated for a Returned Amounts or Goods contract event.