Mihaly Dallos created FINERACT-2148:
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Summary: new charge-off behavior with interest bearing loans
Key: FINERACT-2148
URL: https://issues.apache.org/jira/browse/FINERACT-2148
Project: Apache Fineract
Issue Type: Improvement
Reporter: Mihaly Dallos
{panel}
*As a* loan manager
*I want to* suspend interest accrual or accelerate maturity
*in order to* account only income which will be actually realized
{panel}
h3. *Background and details:*
At the time of charge off there can be different options how to handle future
interest income. Either calculating with 0 interest or make all future
principal due immediately.
_Setting_ for interest bearing products to be introduced:
* Accelerated maturity
* zero interest
h4. Zero interest
* Once a loan charges off, interest accruals must stop
* The schedule should be adjusted to remove interest projections on future
periods (after charge off)
* The schedule should be adjusted to proportionally decrease interest on
current period (where charge off occurred)
* Once accounting entries have posted for charge off, no further interest
accruals can occur on the loan
* Any further debit / credit adjustments (chargeback) post charge off will
also be immediately go through the charged off accounting treatment
* Any repayment reversal before charge off will reverse/replay the charge off
and would in effect increase the charged off principal and interest amounts
h5. Main elements:
* Change schedule: future interest → $0
* No accrual (job)
* Transaction and validation of journal entries
h4. Accelerated maturity
When accelerate maturity to charge off date is set in a loan product and the
loan is charged off:
* New and final installment is created with due date of the charge-off date
containing all future balance
* Installments after charge off date will be removed.
* interest pending till charge off date is added to the new and final
installment
* interest isn’t calculated for the new last and final installment
* Accounting will adopt charge off
* Relevant events sent. (account changed)
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