The Direct Payment interest calculation will be changing in Collection-Master version 9.1E.002. This change only affects firms that have Collection-Master configured to calculate interest on the cost bucket portion of the consumer balance. This specifically pertains to Direct Payments with funds applied to cost recovered in the aforementioned configuration.

Currently, for Direct Payments applied with a previous payment date, interest is credited based on Principal Collected but not costs (Note: This includes Contract & Legal Fees). This is only an issue if costs were set to accrue interest. This means if costs are accruing interest and being recovered via Direct Payment, the credit to interest is not being included. This enhancement will start applying interest credits on Direct Payments for all interest accruing buckets when applied with a previous payment date.

Direct Payment Screen

The FINAN table will include a new CREDIT_INT field that will store the Amount of Interest Credited due to Direct Payment.

Here’s an example of the Test claim breakdown to highlight the effect this change will have:

Direct Payment Table

As an example, consider a $540 Direct Payment is made on 10/1/2020 and posted in Collection-Master on 10/26/2020 with $500 applied to Principal and $40 applied to costs and an interest rate of 15.00%.

Current interest calculation on the principal portion:

  • Interest credit of $5.14 applied to claim

  • 500 Principal per diem amount x 25 days = amount of interest credit applied

  • (500 x .15)/365=0.2054794520547945 per diem amount

  • Then interest accrued over the last 25 days from 10/1/2020 to 10/25/2020

  • 0.2054794520547945 x 25 = 5.136986301369863 which is rounded to 5.14 interest credit applied

New interest calculation: Interest credit of $0.41 applied to claim

  • 40 Cost Recovered per diem amount x 25 days = amount of interest credit applied

  • (40 x .15)/365=0.0164383561643836 per diem amount

  • Then interest accrued over the last 25 days from 10/1/2020 to 10/25/2020

  • 0.0164383561643836 x 25 = 0.410958904109589 which is rounded to 0.41 interest credit applied

  • NOTE: The two added together 5.14 + 0.41 = 5.55 total interest credit applied.

If you’re not sure if you are charging interest on costs you can check Multi-State Setup [1-S-4-W]. If any of the highlighted boxes are “Y” in your setup, then you are charging interest on costs. You will need to check the drop down “Select State” for any of your active states.

Interest Setup

If you think you may have been affected by this problem, it is recommended you review your claims for accuracy. Recalculating interest is the recommended solution.

If you have any questions, please contact our team at cssupportemail@vertican.com