An unpaid late fee is causing unwanted late fees for subsequent due dates...

Handling payments and adjustments, running reports, doing your accounting with Moneylender.
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wtech_josh
Site Admin
Posts: 69
Joined: Tue Jul 30, 2019 7:17 pm

An unpaid late fee is causing unwanted late fees for subsequent due dates...

Post by wtech_josh »

You have a few ways to handle this.

Make sure "lenient late fees" is turned on.
There’s a setting in Portfolio > Portfolio Settings > General tab > “Small outstanding amounts don’t trigger late fees.”. When this is checked, if the amount due at the end of the grace period is ¼ of the regular payment or less, Moneylender won’t charge a late fee. This is meant to address situations like this and also if the borrower pays, for example, $1800 when the scheduled amount was $1803.45. Make sure that box is checked. This affects all loans in the portfolio for all time. Once you change this setting, select all your loans and click Recalculate on the toolbar to have the rule take effect on the actual calculations.

Set a specific trigger threshold for this late fee setting.
Alternatively, if you want strict fee charges on most loans, but want to be lenient for this one loan, select the loan > Settings tab > Late Fee > select the setting > click the Edit (pencil) button > set the Trigger Threshold to something greater than the amount of the late fee. This means that a late fee won’t be triggered if the amount still due at the end of the grace period is below the number you enter.

Tell Moneylender not to try to collect the fee, but still to charge it.
And lastly, if you want to just forget about having the borrower send some extra money to cover the late fee, but don’t want to actually waive the late fee, you can tell Moneylender to stop trying to collect some extra money to cover the fee from Settings tab > Adjustments > New (plus) button > Adjust the AmountDue account for -fee amount (negative adjustment to decrease the amount due) on the date the fee was charged. The fee is still assessed, and the payments received are applied to the fee before paying principal, but no additional payment above the normal amount is required from the borrower. The payoff at the end of the loan will be somewhat higher as a result.
mark415
Posts: 10
Joined: Tue Sep 28, 2021 10:17 pm

Re: An unpaid late fee is causing unwanted late fees for subsequent due dates...

Post by mark415 »

Hi Josh,

In California lenders are not allowed to cascade late fees on mortgage loans. So if a borrower is habitually one month behind, there will only be one late fee for that first missed payment, which may have been years ago.

I've played around with the settings and not found a way to disable the cascading late fees.

Hope that makes sense.

Thanks,
Mark
wtech_josh
Site Admin
Posts: 69
Joined: Tue Jul 30, 2019 7:17 pm

Re: An unpaid late fee is causing unwanted late fees for subsequent due dates...

Post by wtech_josh »

Hey Mark,

Since writing this post, I added another setting the the Late Fee record. It's the drop down with the heading "Skip late fees if the borrower pays at least the current regular payment, even if the account is multiple payments behind?"

You can set the portfolio-wide default for this setting from Portfolio > Portfolio Settings > General tab > check the box for "No late fee if the borrower pays at least XX% of the regular payment." You can override the portfolio default on a late-fee-by-late-fee basis from the Settings tab > Late Fee section > edit or create a late fee. Changes to portfolio settings don't automatically trigger the whole portfolio to recalculate with the new defaults. Select all/any loans you want to recalculate in the main window (click any loan and hit Ctrl-A to select all) and then click the Recalculate button to generate the balance with the new rule in effect.

If your loan will base the late fee on whether the borrower has made a payment this month during the grace period, regardless of whether the loan as a whole is current or past due, you can change the setting in the late fee record to "Regular Payment Avoids a Late Fee" (this is assuming you haven't already made it the portfolio default). You can also set the percentage where a late fee will be added. It defaults to 100%, meaning if the regular payment is $1000, and they send in $999 within the grace period, they'll be charged a late fee. You might make it 90% or 80% if you want to give them a tiny bit of leeway to pay under the regular payment and not get charged. You can set it to 1%, so if they basically pay you almost anything ($10 or more in our example) they'll avoid a late fee.

Pretty sure it was someone from California that first brought the need for this option to my attention. 😄

If a borrower pays a couple days early on a loan that's behind, the payment will apply towards their delinquency, not be held until their upcoming due date. Thus you might see a late fee because their payment on the 27th caught their loan up by a month, but they didn't make a payment between the 1st and the end of the grace period. In that case, you can waive the individual late fee at your discretion. At this point we're deep enough into a corner case that you'll probably only have to mess with that on rare occasions.
mark415
Posts: 10
Joined: Tue Sep 28, 2021 10:17 pm

Re: An unpaid late fee is causing unwanted late fees for subsequent due dates...

Post by mark415 »

Hi Josh,

Thanks for your always thoughtful replies.

I think what I'm describing is actually "more often than not" rather than an edge case. Most of my borrowers are about 25 days behind. That is to say that on the 25th I receive checks that were due the 1st. So every month they miss the grace period and, if I understand you correctly, will be assessed a late fee.

So I set the grace period to 27 days. I didn't want to run into any funny Moneylender issues with overlapping grace periods. But maybe I should set the grace period to 31 days or even 31 days + the standard grace period (maybe 41 days)? I charge late fees so rarely and so deliberately that this might be the best solution.

Mark
wtech_josh
Site Admin
Posts: 69
Joined: Tue Jul 30, 2019 7:17 pm

Re: An unpaid late fee is causing unwanted late fees for subsequent due dates...

Post by wtech_josh »

That's a good strategy. I know of another Moneylender user that has biweekly payments with a 15-day grace period. Overlapping grace periods should only have the effect of waiving more late fees than not, which is kinda the desired result in your case. It should work the way you're expecting with a 40 day grace period. A single payment might satisfy the rules to skip a late fee on two due dates if the payment arrives during the overlapping parts of the grace period. Otherwise, it'll work just as you'd expect.

You can definitely test it out and see how it looks. A nice thing about Moneylender is there's nothing you can change that you can't change back again (except for deleting).
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