Collection Charge Offs and Charge Off Maintenance

New Employee Training Collections Training Guide Collection Charge Offs and Charge Off Maintenance

1. Introduction

This document provides technical guidance on managing Collection Charge Offs and performing Charge Off Maintenance within the FLEX system. This functionality is crucial for handling delinquent accounts, reporting to credit bureaus, and managing forgiven debts.

2. Charging Off a Share Account

The process of charging off a share account is initiated through Collection Maintenance and Inquiry.

2.1. Initiating the Charge Off

  1. Select Account and Suffix: In Collection Maintenance and Inquiry, select the account and suffix to be charged off.
  2. Click Charge Off: In the upper right-hand corner of the screen, click the Charge Off button to begin the Share Charge Off process.

2.2. Charge Off Share Account Screen

On the “Charge Off Share Account” screen, you will provide and verify the following information:

  • Member Info:
    • Social Security Number: Displays the member’s SSN for credit bureau reporting.
    • Sequence Number: System-generated field.
    • First/Middle/Last: Displays the member’s name for credit bureau reporting.
  • Charge Off Info:
    • Charge Off Description: Optional field for a description that will appear in the charge off record.
    • Charge Off Date: Date the record was charged off.
    • Collection Officer: Optional field to store the assigned collection officer.
    • Original Charge Off Code: Select the charge off code for credit bureau reporting.
    • Compliance Condition Code: Select the code for legal compliance reporting to the credit bureau.
    • Consumer Indicator Code: Select the code indicating a special account condition for the primary consumer (e.g., bankruptcy status, consumer location).
    • Special Comment Code: Select if applicable for credit bureau reporting.
  • Details:
    • Current Balance: Displays the current balance of the account.
  • Checkboxes:
    • Add Member To Do Not Allow List?: Check this box to add the member’s SSN to the Do Not Allow list, preventing future account openings.
    • Update Member Bankruptcy Flag?: Check this box to mark the account as bankrupt and exclude it from future mailings.
    • Add Joint Owner(s) to Do Not Allow List?: Check this box to add joint owner(s) SSN to the Do Not Allow list.

2.3. Verify Charge Off Screen (Share Account)

After entering the initial charge off information, click Charge Off to proceed to the “Verify Charge Off” screen.

  • Charge Off Info:
    • Verify the correct account and suffix.
    • Confirm the charge off balance and whether the full suffix balance will be charged off.
    • Note any unblocked cards on the account.
  • Interest: No information will appear in this section when charging off a share account.
  • Debit/Credit GL Accounts:
    • The debit and credit General Ledger (GL) accounts and their descriptions will appear as configured in Share Type Configuration.
    • If you have the authority to change GL accounts, click Lock/Unlock GLs and enter the desired GL accounts.
  • Expense GL Information:
    • The credit union may offset to different GL accounts for items like courtesy pay fees or insufficient fund fees.
    • Click Add to enter additional Expense Information.
  • Complete Charge Off: Click Charge Off on the “Verify Charge Off” screen to finalize the process.

3. Charging Off a Loan Account

The process for charging off a loan account is similar to a share account but includes additional loan-specific fields.

3.1. Charge Off Loan Account Screen

On the “Charge Off Loan Account” screen, you will provide and verify the following information:

  • Member Info: Displays member information for credit bureau reporting.
  • Charge Off Info:
    • Charge Off Description: Optional description for the charge off record.
    • Charge Off Date: Date the loan is being charged off.
    • Collection Officer: Optional field for the assigned collection officer.
    • Original Charge Off Code: Select the charge off code for credit bureau reporting (can be overridden by “Reporting Override”).
    • Compliance Condition Code, Consumer Indicator Code, Special Comment Code: Same as for share accounts.
    • Reporting Override: Select a reporting code to override the system’s normal reporting code based on account status. Leave blank to report actual status.
    • Memo/Chg Off / Disregard Interest: Select how loan interest will be handled:
      • Memo Unpaid Interest: Memo interest due and collect after principal is paid.
      • Charge Off Unpaid Interest: Charge off interest due; added to balance to be charged off.
      • Disregard Unpaid Interest: Zero out member interest; no interest collected.
    • Charge Off Interest Is Interest Exempt?: Appears if “Charge Off Unpaid Interest” is selected. Indicate if the charged off interest is exempt from accruing interest.
  • Details:
    • Current Balance: Displays the current loan balance.
    • Interest Exempt Amount: Displays the amount of the loan exempt from accruing interest.
    • Unpaid Interest: Displays the amount of interest still owed.
    • Amount NOT to Charge Off: Use this field for partial charge-offs. If an amount is entered, fields will display to indicate the new type and suffix for the amount not being charged off.
  • Checkboxes:
    • Add Member To Do Not Allow List?: Same as for share accounts.
    • Add Co-Makers To Do Not Allow List?: Check this box to add co-maker(s) SSN to the Do Not Allow list.
    • Update Member Bankruptcy Flag?: Same as for share accounts.

3.2. Verify Charge Off Screen (Loan Account)

After entering the initial charge off information, click Charge Off to proceed to the “Verify Charge Off” screen.

  • Charge Off Info: Verify the correct account, suffix, and charge off balance.
  • Interest: Summarizes what will happen to interest based on previous selections.
  • Debit/Credit GL Accounts:
    • GL accounts will appear as configured in Loan Type Configuration.
    • Click Lock/Unlock GLs to change GL accounts if authorized.
  • Expense GL Information: The credit union may offset to different GL accounts for items like late fees or insurance add-ons.
  • Complete Charge Off: Click Charge Off on the “Verify Charge Off” screen to finalize the process.

4. Charge Off Maintenance

Charge Off Maintenance is a central hub for viewing, uncharging off, or forgiving previously charged off loans and share accounts.

4.1. Accessing Charge Off Maintenance

  • From the FLEX Main Menu:
    1. Navigate to Collections.
    2. Select Charge Off Maintenance.

4.2. Charge Off Maintenance Screen Overview

The “Charge Off Maintenance” screen lists all accounts that have been charged off through the system.

  • Filters and Actions:
    • Clear Filters: Clears applied filters.
    • Refresh: Refreshes the list of charge-offs.
    • Maximum Results: Set the maximum number of results to display.
    • Add 3rd Party: Allows adding a charge off for a loan not on the system (e.g., third-party credit card).
    • Edit: Edits an existing charge off record.
    • Delete: Deletes a charge off record.
    • Allow New Accounts?: Checkbox to control if the member can open new accounts.
    • New Forgiven Accounts?: Checkbox.
    • Filter: Applies filters.
  • Charge Offs List: Displays details for each charged off account, including:
    • Account, Suffix, Seq, Name
    • Original C/O Balance, Current C/O Balance
    • Charge Off Date
    • Closed, Partial (checkboxes)

4.3. Editing a Charged Off Loan

When you select a charged off loan and click Edit, the “Edit Charged Off Loan” screen appears with two main tabs: “Charge Off” and “Forgiven”.

4.3.1. Charge Off Tab

This tab displays member and charge off information, including details entered during the initial charge off and current charge off amounts.

  • Member Info: Displays member information and whether a Tax ID was used.
  • Charge Off Info:
    • Partial Charge Off: Indicates if the original charge off was partial.
    • Allow New Accounts?: If checked, the member can open new accounts (removed from Do Not Allow List). If unchecked, the member is added to the Do Not Allow List.
    • Charge Off Description, Charge Off Date, Collection Officer, Charge Off Teller: Displays original charge off details.
    • Current Charge Off Code, Original Charge Off Code: Displays the current and original charge off codes.
    • Consumer Information Indicator, Special Comment Code, Compliance Condition Code, Reporting Override: Displays codes entered at the time of charge off. The Reporting Override value will be reported to the credit bureau regardless of actual account status.
  • Charge Off Amounts: Displays charge off amounts and tracks the current balance as payments are made.

4.3.2. Uncharge Off Functionality

The system allows users to “Uncharge Off” an account if it was charged off in error.

  1. On the “Edit Charged Off Loan” screen, click the Uncharge Off button.
  2. The “Uncharge Off Info” screen will display details of the account, suffix, balances, and debit/credit GL accounts.
  3. Verify the information and click Uncharge Off to reverse the original charge off.
    • Principal to be Uncharged Off, Interest to be Uncharged Off, Charges/Fees to be Uncharged Off: Displays amounts that will be reversed.
    • Interest Uncharged Off will be entered in the memo interest field and not included in the current loan balance.
    • The current balance of the suffix will be updated.

4.3.3. Forgive Charge Off Functionality

If the credit union will not receive future payments for a charged off loan or share account, the account can be “Forgiven” to generate a 1099-C. Once forgiven, the charge off balance will not be available for transaction entry, and payments will not be allowed.

  1. On the “Edit Charged Off Loan” screen, click the Forgive button.
  2. Enter applicable information to Forgive Charge Off and click Ok. This information will be reported to the IRS using Form 1099-C in the relevant reporting year.

4.3.4. Forgiven Tab

Once a charge off (or partial charge off) has been forgiven, the “Forgiven” tab will display the forgiveness information.

  • Forgiven List: Displays a list of forgiven amounts by Year, Principal, Interest, Charges/Fees, and Date Forgiven.
  • Forgiven Details: Displays information entered when the charge off was forgiven, including:
    • Bankruptcy: Checkbox.
    • Personally Liable: Checkbox.
    • Reporting Year, Forgiven Date.
    • Description: Line 1-4 for additional details.
  • Forgiven Amounts:
    • Original Charge Off Amount, Interest Exempt Amount, Current Charge Off Balance, Fair Market Value.
    • Current Forgiven Amount, Principal Forgiven, Interest Forgiven, Charges/Fees Forgiven.

4.3.5. Unforgive Functionality (from Forgiven Tab)

In case of an error, a user may “Unforgive” a previously forgiven charge off, reversing or editing the entered amounts.

  • If Principal to Unforgive equals Principal Forgiven, the charge off will be deleted from the Forgiven List.
  • If Principal to Unforgive is less than Principal Forgiven, the charge off will remain in the Forgiven List with updated amounts.

4.4. Interest Exempt

Clicking Int. Exempt (Interest Exempt) allows you to view all interest exempt transactions.

5. General Notes and Best Practices

  • Recommended Process: It is recommended that charge-offs be completed through Collection Maintenance to ensure correct tracking of transaction history and accurate updates to the charge-off record balance.
  • Confidentiality: This document is published by Computer Marketing Corporation/FLEX and is intended solely for its contracted clients. It may contain privileged or confidential information and should not be disseminated without authorization.