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By Deal Pack - September 19, 2012
The Current Installment Rule is a practice now adopted by most UCCC states (CO, ID, IA, IN, KS, LA, ME, NH, NC, WV, WI, WY). This change will affect the way delinquency fees are collected on past due accounts and determine when they may be collected. In short it prevents late charges from being assessed on late charges.
Under the rule, payments must first be applied to the current payment due in the period in which the payment is received and THEN to delinquent installments. Once a scheduled payment is paid in full all additional payments will FIRST be applied to previous unpaid installments and THEN applied to any uncollected late charges. If a customer makes a partial payment it will work the same way as a full payment – it is applied to the current installment due and not towards previous late charges.
What classifies a current installment? A current installment the most recent payment due prior to the date a payment is made. For example: a monthly payment due on January 1st would be the current installment for a payment made between January 1st and February 1st. Under the rule no delinquency charge may be collected on an installment payment that is paid in full within 10 days after its scheduled installment due date (Jan. 1st) even though an earlier installment payment or a delinquency charge on an earlier installment may not have been paid in full.
As an example: If a borrower misses his January payment and is assessed a late charge for January and then sends a full payment in February (before the February grace period is over) intending it to be January’s payment, the current installment rule says to apply the payment to February’s installment without collecting January’s late charge. Furthermore, you cannot assess a late charge for any payment received in Feb because a full installment payment was already received. The January late charge will remain uncollected until a future payment is made over and above the current installment.
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