Section 6

Interest Processing

Objectives

Upon completion of this section, you will be able to:

 Explain the roles of Processing Control Tables, Logo records, Credit Plan Masters,
and Interest Tables in interest processing
 Identify Interest Table options for defining a plan’s balance subject to finance charges
 Identify Interest Table options for starting interest accrual and processing interest on
new debits
 Identify Interest Table fields used in the calculation of interest
 List available Rate Types and identify the fields associated with each of them
 Explain the roles of the Rate Index Table and the Usury Table
 Identify interest parameters on the Account Control Table
 Identify interest processing overrides and state their priorities in the interest
processing hierarchy
 List the methods of deferring and waiving interest in CMS
CMS 8.0

INTEREST PROCESSING OVERVIEW

In CMS, several different types of records contribute to processing interest on
accounts. You can control the interest processing by establishing Processing
Control Tables, Logo records, Credit Plan Masters, and Interest Tables that work
in conjunction with each other.

PCT IDS

A PCT ID is a three-character alphanumeric code that serves as the default control

over interest processing for an account. Every account in CMS must have a PCT
ID on its Account Base Segment.
 If an account is in a private label retail logo, its PCT ID is the RESIDENCE ID
field (state, province, or country where the customer resides).
 If an account is in a bankcard logo, its PCT ID is the ISSUANCE ID field (state,
province, or country where the card was issued).
These fields are located on page 03 of the Account Base Segment record.
Both fields display if the account is in a bankcard logo. Only RESIDENCE ID
displays if the account is in a private label logo.
Although typically used to represent a geographical area, a PCT ID can also be
used to represent a special grouping of customers or accounts within a logo.

ARMB PAGE 03

ARMB ( ) USER DEDFINED TITLE PAGE 03 06/15/1999

ACCOUNT BASE SEGMENT 14:00:00
ORGANIZATION 800 LOGO 850 ACCOUNT 0008008500000000001
RESIDENCE ID ( FL ) ISSUANCE ID ( FL ) SECURED 0 COLLATERAL 0
PRICING CTRL ( ) START DATE ( 00000000 ) EXPIRATION DATE ( 00000000 )
PCT LVL OVRRIDE ( ) START DATE ( 00000000 ) EXPIRATION DATE ( 00000000 )
OWNERSHIP FLAG ( 0 ) OFFICER ( )
WAIVE: INT ( 0 ) LATE CHARGES ( 0 ) LATE NOTICES ( 0 ) MEMBERSHIP ( 0 )
LTR ( 0 ) OVERLIMIT FEE ( 0 ) OVLM NOTICE ( 0 ) NSF 1-5 ( 0 )
SVC FEES: 1 ( 0 ) 2 ( 0 ) 3 ( 0 ) 4 ( 0 ) 5 ( 0 )
6 ( 0 ) 7 ( 0 ) 8 ( 0 ) 9 ( 0 ) 10 ( 0 )
USER FEES 1 ( 1 ) 2 ( 1 ) 3 ( 1 ) 4 ( 1 ) 5 ( 1 ) 6 ( 1 ) CRD FEE ( 0 )
SKIP PAYMENT ( Z ) FREQ SHOP IND ( Y ) FRAUD REPORT ( Y ) CASH LMT ( Y )
PREPAY ALLWD ( 0 ) PREPAY MTHS ( 00 ) PREPAY ZERO ( 0 ) LOAN LMT ( Y )
DELQ CNTRS: PAST ( 000 ) 30 DAY ( 000 ) 60 DAY ( 000 ) 90 DAY ( 000 )
120 DAY ( 000 ) 150 DAY ( 000 ) 180 DAY ( 000 ) 210 DAY ( 000 )
24 MONTH HISTORY
01/13 02/14 03/15 04/16 05/17 06/18 07/19 08/20 09/21 10/22 11/23 12/24
DELQ 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
PYMT ( N ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ()
( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )

PF1=ARMU PF2=ARIB PF3=ARIQ PF4=ARMN PF5=ARME PF6=INQUIRY

Section 6 - 2
CMS 8.0

THE ROLE OF LOGO RECORDS

An account’s PCT ID points the account to the identical ID on a Processing

Control Table that exists at one of the three processing levels in CMS: system,
organization, and logo. The PROC CONTROL LEVEL field on page 14 of the Logo
record determines the level of the Processing Control Table that will be used by
accounts in the logo.

ARML PAGE 14

ARML ( ) ** USER DEFINED TITLE ** PAGE 14 11/13/2001

LOGO RECORD 13:30:20
ORGANIZATION 100 LOGO 101
PROCESSING CONTROL OPTIONS (CONT.) BILL THRESH ( 000001000 )
MIN REAGE MONTHS ( 12 ) REAGE PERIOD ( 036 ) REAGE PERIOD LIMIT ( 2 )
PROC CONTROL LEVEL ( O ) PRE-PAY ALLOWED ( 2 ) PRE-PAY MONTHS ( 03 )
BILL EVEN AMOUNTS ( Y ) BILL OVER LIMIT ( N )
SKIP ALLOWED ( Y ) SKIP SELECTED ( N ) SKIP EXPIRES ( )
REAGED AT ( C ) ( 030 ) REAGE FREQ ( 24 ) REAGE CD LVL ( 4 )
FLEX BILL MONTHS ( 00 ) PREPAY ZERO ( 1 ) PLAN PAYMENT ( F )
PAYMENT VARIANCE ( A ) ( 000000500 ) DELINQUENCY INTEREST LEVEL ( 4 )
PAYOFF VARIANCE A ( 000001000 ) P ( 0000000 ) MAX ( 000000000 )
QUAL PMT A ( 000002000 ) P ( 9000000 ) NOM BILL OVERLIMIT ( 1 )
QUAL PAYMENT RESET % ( 090 ) C/O CREDIT APPLICATION F/L/B ( F )
PAYMENT APPLICATION LVL ( P ) MIN DELQ AMT ( 00000000000005000 )
UNDER PAYMENT 1-4 F/L OVER PAYMENT 1-4 F/L
REVOLVING ( 1 ) ( F ) REVOLVING ( 1 ) ( F )
DEFERRED INT-F/C ( 1 ) ( F ) DEFERRED INT-F/C ( 1 ) ( F )
DEFERRED PAYMENT ( 1 ) ( F ) DEFERRED PAYMENT ( 1 ) ( F )
DEFERRED BILLING ( 1 ) ( F ) DEFERRED BILLING ( 1 ) ( F )
OTB: CR BAL ( 0 ) DISP ( 0 ) LOAN AMT ( 1 )
AUTH DAYS - APP ( 10 ) AUTH DAYS - DECL ( 15 ) AUTH VARIANCE ( 1500000 )
CURRENCY 840 NOD 2 PER ITEM NOD 2 PERCENTAGE NOD 7
PF1=ARMU PF2=ARMS PF3=ARMO PF4=ARMG PF5=ARMC PF6=INQUIRY

This illustration shows that for accounts in Org 800, Logo 850, the Processing
Control Table is at the logo level.

PROCESSING CONTROL TABLES

A Processing Control Table (PCT) is composed of PCT IDs and the numbers of
their associated Account Control, Service Charge/Fee, Insurance, and Interest
Tables. After setting up all of the Account Control, Service Charge/Fee,
Insurance, and Interest Tables that your institution will be using, you can establish
Processing Control Tables that will point accounts, by means of their PCT IDs, to
different combinations of these tables, where the actual processing parameters
exist.
Under each ID on the Processing Control Table are 12 Rate Table Occurrence
Indicators (RTOI 1 -12), where you can enter the numbers of Interest Tables that
you have already established. In this way, you can associate up to 12 different
Interest Tables with each individual PCT ID.

Section 6 - 3
CMS 8.0

ARMF PAGE 01

ARMF ( ) USER DEFINED TITLE PAGE 01 06/15/1996

PROCESSING CONTROL TABLE 14:00:00
ORG 900 LOGO 950 DEFAULT PCT ID ( FL )
ID/LAST MAINT FL 06/14/1999 GA 06/14/1999 HI 06/14/1999
EFF DTE/RATF ( 06301996 ) ( N ) ( 00000000 ) ( N ) ( 00000000 ) ( N )
N/A DTE/FLAG ( 06011996 ) ( U ) ( 00000000 ) ( N ) ( 00000000 ) ( N )
CURR PEND CURR PEND CURR PEND
ACCT 201 ( 200 ) 201 ( 000 ) 200 ( 000 )
SVC/FEE 303 ( 300 ) 300 ( 000 ) 301 ( 000 )
INS 402 ( 400 ) 401 ( 000 ) 402 ( 000 )
RTOI 1 502 ( 505 ) 502 ( 000 ) 502 ( 000 )
RTOI 2 503 ( 503 ) 502 ( 000 ) 502 ( 000 )
RTOI 3 501 ( 501 ) 503 ( 000 ) 503 ( 000 )
RTOI 4 504 ( 504 ) 504 ( 000 ) 504 ( 000 )
RTOI 5 501 ( 501 ) 501 ( 000 ) 501 ( 000 )
RTOI 6 502 ( 502 ) 502 ( 000 ) 502 ( 000 )
RTOI 7 503 ( 503 ) 503 ( 000 ) 503 ( 000 )
RTOI 8 504 ( 504 ) 504 ( 000 ) 504 ( 000 )
RTOI 9 501 ( 501 ) 501 ( 000 ) 501 ( 000 )
RTOI 10 502 ( 502 ) 502 ( 000 ) 502 ( 000 )
RTOI 11 503 ( 503 ) 503 ( 000 ) 503 ( 000 )
RTOI 12 504 ( 504 ) 504 ( 000 ) 504 ( 000 )

PF1=XXXX PF2=XXXX PF3=*TOP* PF4=*BOT* PF5=*BWD* PF6=*FWD*

This illustration shows the logo-level Processing Control Table containing PCT
ID “FL.” For this PCT ID, Interest Table 502 is currently in effect at the RTOI 1
position, Interest Table 503 is currently in effect at the RTOI 2 position, Interest
Table 501 is currently in effect at the RTOI 3 position, and so on.

THE ROLE OF CREDIT PLAN MASTERS

In the RATE TBL OCCUR (Rate Table Occurrence) field on the Credit Plan Master
(ARMC01), you enter a value from 01 to 12 to specify which of the RTOI positions
contains the number of the Interest Table to be used in calculating interest on the
plan.
In this way, an account with multiple credit plan segments can be subject to
multiple Interest Tables and, therefore, multiple interest rates. Each plan on the
account can have interest calculated differently because each Credit Plan Master
can point to a different RTOI on the Processing Control Table.

 Other interest-related fields on the Credit Plan Master are

covered in Section 5 of this manual.
Assume that the account is participating in plan 80002 and that the RATE TBL
OCCUR on Credit Plan Master 80002 is “03.”

THE ROLE OF INTEREST TABLES

Interest Tables contain the actual parameters for calculating interest on credit plan
segments. Interest Tables allow you to define the balance subject to finance
charges, when interest will begin accruing, the accrual method, the rate type, and
the percentage rate(s) to be used in the interest calculation.

Section 6 - 4
 Interest Processing

Assume that Interest Table 501, the Interest Table in the RTOI 3 position on the
Processing Control Table under ID “FL,” contains a fixed rate of 14%.

THE RELATIONSHIPS AMONG THE RECORDS

ACCOUNT BASE SEGMENT LOGO RECORD

ORGANIZATION 800 LOGO 850 ORGANIZATION 800 LOGO 850

ISSUANCE ID ( FL ) PROC CONTROL LEVEL ( L )

PROCESSING CONTROL TABLE

ORG 800 LOGO 850

ID FL

CURR

RTOI 3 501

CREDIT PLAN MASTER INTEREST TABLE

ORG 800 PLAN NBR 80002 ORG 800 LOGO 850 TABLE 501

RATE TBL OCCUR ( 03 ) RATE TYPE ( F )

RATE 1 ( 1400000 )

The PCT ID on the Account Base Segment and the Processing Control Level on
the Logo record point the account to the same ID on a Processing Control Table at
the designated processing level.
At the same time, the Rate Table Occurrence on the Credit Plan Master points the
plan to a Rate Table Occurrence Indicator on the Processing Control Table.
At the intersection of the ID and the RTOI on the PCT is the number of the
Interest Table in effect for all accounts with the ID that participate in the plan.
Note that the Interest Table must be at the same processing level as the PCT.

Section 6 - 5
CMS 8.0

THE RESULT

ARMA PAGE 02

ARMA ( ) USER DEFINED TITLE PAGE 02 06/15/1999

PLAN SEGMENT RATE/HISTORY 16:00:00
ORG 800 ACCT 0008008500000000001 PLAN 80002 RETAIL PURCHASE PLAN
RATE TBLE OCCUR IND 03 PURCHASE / SALE
CURRENT RATES:
RC RTF RTE LMT I/T
# MET TYP IND BASE B/S CALC
*****TIER LIMIT**** RATE VARIANCE ADJUSTED RATE BEG DATE
N F Y +.0000000
9999999 .1400000 +.0000000 +.0000000 .1400000 06/14/1999

PF1=ARMU PF2=PG DOWN PF3=*TOP* PF4=*BOT* PF5=*BWD* PF6=*FWD*

The result is that Credit Plan Segment 80002 on the account is subject to a fixed
rate of 14%. Other credit plan segments on the account, however, may be subject
to different rates.

MULTIPLE-PLAN ENVIRONMENTS

This scheme is useful in any multi-plan environment where each plan requires
different interest-processing parameters.
 Because credit plans can be defined for specific types of sale transactions
(cash advance, retail purchase, etc.), CMS allows “transaction-level pricing.”
 The use of Processing Control Tables at multiple processing levels makes it
possible to “reprice” an individual account either by changing its PCT ID or
changing the account’s default processing level.
 You may decide to establish a standard set of PCT IDs at the logo level and
behavior scoring alternatives at the organization level.

Section 6 - 6
 Interest Processing

REVIEW

Match each control record with its role in interest processing.

_____ 1. Processing Control table A. Contains the RATE TBL OCCUR field,
which specifies which RTOI position
contains the number of the Interest table
to be used in calculating interest on the
credit plan

_____ 2. Logo record B. Contains the actual parameters for

calculating interest on a credit plan, such
as the balance subject to finance charges
and the rate type

_____ 3. Credit Plan Master C. Is composed of PCT IDs and the numbers
of their associated Account Control,
Service Charge/Fee, Insurance, and
Interest tables

_____ 4. Interest table D. Contains the PROC CONTROL LEVEL field,

which determines the level of the
Processing Control table to be used by
the accounts

Section 6 - 7
CMS 8.0

INTEREST TABLES
Interest Tables contain the actual parameters for calculating interest on credit plan
segments. The calculation of interest is based on applying a percentage rate (or
rates) to the plan segment’s Balance Subject to Finance Charges (BSTFC).
Numerous options on the Interest Table allow you to define specifically how
interest will be assessed. These options include:
 Flags to include/exclude billed-not-paid components of a plan segment’s
balance during the interest calculation
 Codes that determine when interest calculations will begin on debit and credit
transactions
 A code that determines whether interest accrued on new debits posted in the
current cycle will be waived, charged, or deferred
 The year base (number of days in the year) used to calculate interest
 The interest accrual method (daily or monthly)
 The types of interest rates (fixed, tiered, variable, and tiered variable)
 Controls over variable rate increases and decreases.
You can establish up to 998 Interest Tables at each processing control level in
CMS (system, organization, and logo).

Section 6 - 8
 Interest Processing

ARMR PAGE 00

ARMR ( ) USER DEFINED TITLE PAGE 00 08/01/1999

INTEREST TABLE 13:03:32

ORGANIZATION ( 100 ) LOGO ( 101 ) TABLE ( 001 )

PF1=ARMU PF2=ARMF PF3=ARAR PF4=ARAI PF5=ARMI

Use the Locate screen in maintenance mode (ARMR00) or inquiry mode

(ARQR00) to identify an existing Interest table that you want to modify or query.
Use the Locate screen in add mode (ARAR00) to identify a new Interest table that
you want to add. In add mode, you can copy an existing Interest table to use as a
model for the new table.

 An Interest table can be assigned only to a Processing Control

Table that is established at the same processing level—
system, organization, or logo. For example, you cannot assign
a system-level Interest table to a Processing Control Table
established at the organization or logo level.

 When using a system-level table, all organizations should be

assigned the same currency code. If organizations have
different currency codes, do not use a system-level table.

Section 6 - 9
CMS 8.0

ARMR PAGE 01

ARMR ( ) USER DEFINED TITLE PAGE 01 08/01/1999

INTEREST TABLE 13:04:03

ORGANIZATION 100 LOGO 101 TABLE 001

MAINTENANCE TO THIS RECORD AFFECTS THE FOLLOWING PROCESSING CONTROL TABLE IDS

AK AR AZ CA CO CT DC DE FL GA
HI IA ID KS KY LA MA MD ME MI
MN MO MS MT NC ND NE NH NJ NM
NV NY OH OK OR PA RI SC SD TN
TX UT VA VT WA WI WV WY 123

PF1=ARMU PF2=ARMF PF3=*TOP* PF4=*BOT* PF5=*BWD* PF6=*FWD*

This screen displays only in maintenance mode (ARMR). The PCT IDs listed on
the screen identify Processing Control Tables to which the Interest table has been
assigned. Each Processing Control Table contains processing parameters for a
state, province, or country. If in maintenance mode and you do not want to
modify the Interest table associated with the Processing Control Tables listed on
this screen, exit before performing any maintenance.

Section 6 - 10
 Interest Processing

DEFINING INTEREST OPTIONS

FLAGS TO INCLUDE/EXCLUDE B-N-P COMPONENTS

In CMS, interest calculations need not be performed on the entire credit plan
balance. Using the flags at the top of the Interest Table, you can specify which
billed-not-paid components of the plan’s balance will comprise the plan’s Balance
Subject to Finance Charges (BSTFC).
Therefore, if your institution is prohibited from charging interest on interest, you
can exclude prior-assessed interest from a plan’s BSTFC when CMS computes
new interest on the plan. You can also set the flags to include or exclude fees and
services charges.

INTEREST START DEBIT AND INTEREST START CREDIT

The INT START DB code determines when interest calculations will begin on debit
transactions. You can choose to have calculations begin on the effective date of a
transaction or on the posting date. Other values allow you to begin interest
calculations based on payment due date or statement date. The INT START CR code
determines when credit transactions affect the calculation of interest.

INTEREST NEXT STATEMENT

The INT NEXT STMT field controls how CMS processes interest on new debits
posted during a billing cycle. This field provides additional controls beyond
grace days processing. It is used to waive, charge, or defer interest on new debits
in specific circumstances. The circumstances occur when:
 The cycle is the first cycle of a new account (the beginning balance is zero)
 The cycle is a cycle in which an account reactivates after a period of
dormancy (the beginning balance is zero)
 The cycle is a cycle in which the customer pays in full (the beginning balance
is greater than zero but is paid in full during the cycle).
For any value that you enter in the INT NEXT STMT field, the system will test for
either of these conditions:
 Whether the beginning balance of the cycle is zero
 Whether the beginning balance is greater than zero but is paid in full during
the cycle.
Depending on the value entered in this field, the test for beginning balance and
payment in full may be at the account or the plan level, and grace days may be
observed or ignored. Use the following guidelines when deciding which value to
use:

Section 6 - 11
CMS 8.0

 If you want to waive interest on new debits in the circumstances listed above,
choose one of the following options: N, A, P, B, or Q.
 If you want to charge interest on new debits in the circumstances listed above,
choose one of the following options: Y or U.
 If you want to defer interest on new debits in the circumstances listed above,
choose one of the following options: D, G, or R.
The “Understanding Interest Options” chapter of the CMS User’s Guide contains
descriptions and examples of these options.

YEAR BASE AND ACCRUAL METHOD

The YEAR BASE code specifies the base number of days in the year to be used in
computing interest on plan segments subject to this Interest Table.
The ACCRUAL METHOD specifies whether interest will accrue on the plan either
daily or monthly. In additional to standard monthly accrual, CMS offers a
“monthly adjusted ending” option.
Using the daily accrual method, CMS updates the aggregate BSTFC and accrued
interest fields on the plan segment during each processing run. At cycle close, the
system bills the accrued interest to the account.
Using the monthly method, CMS accrues no interest on the plan segment. At the
cycle close, the system calculates the Average Daily Balance (the aggregate
BSTFC divided by the number of days in the cycle) and applies the interest rate to
it. The monthly accrual method requires a year base of 360 days.
Using the monthly adjusted ending method, CMS accrues no interest on the plan
segment. At the cycle close, the system calculates an “average BSTFC” (the
beginning principal balance minus cycle-to date debits) and applies the interest
rate to it.
Using the balance at month end method, CMS accrues no interest on the plan
segment. At the cycle close, the system takes the balance at the end of the cycle
and calculates the BSTFC and applies the interest rate to it. This method requires
a year base of 360 days.
When calculating interest, CMS uses predetermined factors. For the daily interest
method, the factor is based on the number 1 divided by the YEAR BASE. For all of
the monthly methods, the factor is based on the number 1 divided by the YEAR
BASE and multiplied by 30.

Section 6 - 12
 Interest Processing

The following table shows exactly how interest is computed using the different
combinations of accrual methods and year bases:

If interest is to be computed… The formula is…

Daily with a 365 day year base BSTFC x Interest % Rate x .0027397
Daily with a 366 day year base BSTFC x Interest % Rate x .0027322
Daily with a 360 day year base BSTFC x Interest % Rate x .0027778
Monthly with a 365 day year base BSTFC x Interest % Rate x .0821918
Monthly with a 366 day year base BSTFC x Interest % Rate x .0819672
Monthly with a 360 day year base BSTFC x Interest % Rate x .0833333
Balance at month end with a 360 year base BSTFC x Interest % Rate x .0833333

In CMS, the amount of interest assessed on a plan segment is not determined by

interest rate alone. You may have two or more Interest Tables with the same rate
on them. However, if their year bases and accrual methods are different, the
amount of interest assessed by each will be different.

ROUNDING OF INTEREST CALCULATIONS

Another influence on the exact amount of interest assessed by an Interest Table is

the rounding method specified in the INT CALCULATION field. You can choose to
round up or down, always round up, or forego rounding.

Section 6 - 13
CMS 8.0

ARMR PAGE 02

ARMR ( ) USER DEFINED TITLE PAGE 02 08/01/1999

INTEREST TABLE 13:20:22
ORGANIZATION 100 LOGO 000 TABLE 001 LAST MAINT 06/21/1999

INTEREST OPTIONS
INT ON MEMBERSHIP ( N ) INT ON NSF FEE 1-5 ( N ) INT START DB ( P )
INT ON INT ( N ) INT ON SVC ( N ) INT START CR ( P )
INT ON OVER LMT ( N ) INT ON INS ( N ) INT NEXT STMT ( N )
INT ON COLL FEES ( N ) INT ON RECOV FEES ( N ) INT ON LATE CHG ( N )
INT ON USER FEE 1 ( 0 ) INT ON USER FEE 2 ( 0 ) INT ON USER FEE 3 ( 0 )
INT ON USER FEE 4 ( 0 ) INT ON USER FEE 5 ( 0 ) INT ON USER FEE 6 ( 0 )
YEAR BASE ( 0 ) ACCRUAL METHOD ( D ) INT CALCULATION ( 0 )
RATE TYPE ( F ) LIMIT INDICATOR ( Y )
RATE INDEX TBL ( 000 ) CAP REDUCTION ( 0000000 ) CAP INCREASE ( 0600000 )
FLOOR RATE 1 ( 0000000 ) CEILING RATE 1 ( 2000000 )
FLOOR RATE 2 ( 0000000 ) CEILING RATE 2 ( 9999999 )
LMT1 ( 00000000000000000 )

CURRENCY 840 NOD 2 PER ITEM NOD 2 PERCENTAGE NOD 7

PF1=ARMU PF2=ARMF PF3=ARAR PF4=ARAI PF5=ARMI PF6=INQUIRY

RELATED FIELDS
INT ON INT Code that indicates whether to charge interest on interest (finance
charge compounding). The values are:
N = Do not charge interest (Default)
Y = Charge interest.

INT START DB Code that indicates when interest calculations begin on debit
transactions. The values are:
S = Cycle date (after billing)
T = Transaction date (effective date of the
transaction)
P = Posting date of the transaction (Default)
G = Greater of the transaction date or the cycle
date
D = Day after the payment due date.

 If you choose option S (calculation from statement date), there

is no accrual of interest on new debits during a cycle, and any
entry in the INT NEXT STMT field will have no effect on interest
processing.
INT START CR Code that indicates when credit transactions affect the calculation

Section 6 - 14
 Interest Processing

of interest. The values are:

T = Transaction date (from the effective date of
the transaction)
P = Posting date (from the posting date of the
transaction). (Default)

 A payment reversal is an exception to normal INT START DB

and INT START CR processing. Although payment reversals are
debits, CMS uses the INT START CR value for them so that
credit adjustments will be correct.

INT NEXT STMT Code that indicates how CMS charges interest on new
transactions posted in the current billing cycle. The values are:
N = Do not charge interest (Default)
Y = Charge interest on all new transactions posted
in the current billing cycle.
A = Waive all interest based on the account
balance. Accrue interest on the plan balance
subject to finance charge, which can include
new transactions in the current cycle. Waive
accrued interest if the account beginning
balance this cycle is zero, the account
beginning balance this cycle is paid in full by
the cycle date, or the account beginning
balance is paid within the payoff variance by
the cycle date.
D = Defer interest if a payment is posted prior to
the cycle date. Interest is accrued, can include
new transactions, and can be deferred if the
beginning balance is zero or the beginning
balance is paid off before this cycle. Accrued
interest that is deferred in the current cycle is
waived in the next cycle if the beginning
balance is paid in full by the next cycle.
G = Accrue and defer interest on new purchase
transactions. Accrued interest that is deferred
in the current cycle is waived in the next
billing cycle if the beginning balance is paid
in full by the expiration of grace days.

R = Residual interest. Accrue and defer interest

Section 6 - 15
CMS 8.0

on all new purchases in the cycle. If the

balance is paid in full within the grace period,
waive interest on the prior cycle purchases. If
the cycle balance contains a portion of the
balance that was billed on any previous
billing cycle, that portion of the balance
(residual balance) is not subject to waiving of
interest.
P = Waive all plan interest based on plan balance.
Accrue interest on plan balance subject to
finance charge, which can include new
transactions in the current cycle. Waive
interest accrued on each plan if the plan
beginning balance this cycle is zero or the
plan beginning balance is paid in full by the
cycle date.
B = Rebate interest at the account level. If the
beginning balance of the account, less last
month’s finance charge, is paid in full, CMS
waives the current month’s interest and
rebates last month’s finance charge.
Q = Rebate interest at the plan level. If the
beginning of the credit plan segment, less last
month’s finance charge, is paid in full, CMS
waives the current month’s interest and
rebates last month’s finance charge.
U = Charge interest unconditionally. CMS
charges interest even if the account is paid off
in the current billing cycle.

YEAR BASE Code that indicates the year base CMS uses for interest
calculations. The values are:
0 = Actual 365 or 366 days (Default)
1 = Fixed 365 days
2 = Fixed 360 days (if ACCRUAL METHOD is A or B).

Section 6 - 16
 Interest Processing

ACCRUAL Code that indicates the accrual method CMS uses for interest
METHOD calculations. The values are:
A = Monthly accrual
D = Daily accrual (Default)
E = Monthly adjusted ending balance
B = Balance at the end of the cycle.

INT Code that indicates the rounding method CMS uses to round or
CALCULATION truncate interest calculations. Rounding is based on the currency
NOD and the number that follows the last decimal in the
currency. The values are:
0 = Standard rounding (If the number that follows
the last decimal in the currency is 1 to 4,
CMS rounds down; if the number is 5 to 9,
CMS rounds up)
1 = Always round up (If the number is 1 to 9,
CMS rounds up)
2 = Truncate (CMS does not round).

Example 1: If the currency NOD is 2 and the calculated amount

is $66.3749, the number that follows the last decimal in the
currency is 4. CMS rounds or truncates the calculated amount as
follows:
Standard rounding (value 0) = $66.37
Round up (value 1) = $66.38
Truncate (value 2) = $66.37

Example 2: If the currency NOD is 3 and the calculated amount

is $66.3749, the number that follows the last decimal in the
currency is 9. CMS rounds or truncates the calculated amount as
follows:
Standard rounding (value 0) = $66.375
Round up (value 1) = $66.375
Truncate (value 2) = $66.374

Section 6 - 17
CMS 8.0

RATE TYPES

You can choose from among 5 different rate types, including interest-free (zero
rate).

F = Fixed rate A single rate is applied, regardless of the amount of the plan
segment balance
T = Tiered rates Multiple rates are applied based on plan segment balance
ranges
V = Variable rate A base rate is applied, plus or minus a single variance,
regardless of the plan segment balance
U = Tiered variable A base rate is applied, plus or minus multiple variances based
on plan segment balance ranges
Z = Interest-free No rate is applied.

FIXED RATE

If you are using a fixed rate, enter the rate in the RATE 1 field on page 03 of the
Interest Table. No other rate-related entries are necessary.

TIERED RATES

If you are using tiered rates, enter however many rates you will be using in the
RATE 1 – RATE 9 fields on page 03. Then enter the upper limits of the plan segment
balance ranges in the appropriate LIMIT1 – LIMIT8 fields on page 03. You must also
enter a value in the LIMIT INDICATOR on page 02 to indicate how the tier limits will
be handled.

VARIABLE RATE

If you are using a variable rate, enter the index number of the base rate in the
RATE INDEX TBL field on page 02. Then enter the VARIANCE percentage in the RATE
1 line on page 03. Because the base rate will be drawn from the Rate Index Table,
the RATE 1 field itself must contain zeros.

TIERED VARIABLE RATES

If you are using tiered variable rates, enter the index number of the base rate in
the RATE INDEX TBL field on page 02. Enter however many variances you will be
using in the VARIANCE fields on page 03. Because the base rate will be drawn from
the Rate Index Table, the RATE 1 – RATE 9 fields must contain zeros. Enter the
upper limits of the plan segment balance ranges in the appropriate LIMIT1 – LIMIT8
fields on page 03. You must also enter a value in the LIMIT INDICATOR on page 02
to indicate how the tier limits will be handled.

LIMIT INDICATOR

Section 6 - 18
 Interest Processing

This field instructs CMS on how to use the tier limits for tiered and tiered variable
rates. If you select option N, the system will apply a different interest rate to each
portion of the balance that falls into a tier range. If you select option Y, the
system will apply one rate based on where the total balance falls in the tier ranges.
Example: The following example illustrates how the LIMIT INDICATOR works.
Assume that a plan segment has a balance of $2,500. Tiers have been set up as
follows:

Rate 1 1350000 Limit 1 00000000000001000

Rate 2 1150000 Limit 2 00000000000002000
Rate 3 0950000 Limit 3 00000000000003000

If the LIMIT INDICATOR is set to N, the system will apply a rate of 13.5% to the first
$1000 of the balance, a rate of 11.5% to the second $1,000, and a rate of 9.5% to
the remaining $500.
If the LIMIT INDICATOR is set to Y, however, the system will apply a rate of 9.5% to
the entire balance.

CONTROLS OVER VARIABLE RATE INCREASES AND DECREASES

When you use a variable rate or tiered variable rates, the base rate is located on a
Rate Index Table that must be established and maintained separately from the
Interest Tables. Interest rates that result from applying a margin of points to an
index rate (such as the prime lending rate) are termed the calculated or actual
rates on the plan segments. These actual rates will rise and fall as the base rate
rises and falls.

 The Rate Index Table is covered later in this section of the

manual.

You can control the effects of increases or decreases in the base rate by using the
following fields:
CAP REDUCTION specifies the maximum number of points an actual rate will be
allowed to fall. CAP INCREASE specifies the maximum number of points an actual
rate will be allowed to rise. Use FLOOR RATE 1 and CEILING RATE 1 to set minimum
and maximum actual rates for plan segments subject to the Interest Table. If you
want to have two sets of floors and ceilings based on a balance cut-off amount,
use FLOOR RATE 2 and CEILING RATE 2 as well, and enter the balance amount in the
LMT1 field on page 02.

ARMR PAGE 02

Section 6 - 19
CMS 8.0

ARMR ( ) USER DEFINED TITLE PAGE 02 08/01/1999

INTEREST TABLE 13:20:22
ORGANIZATION 100 LOGO 000 TABLE 001 LAST MAINT 06/21/1999

INTEREST OPTIONS
INT ON MEMBERSHIP ( N ) INT ON NSF FEE 1-5 ( N ) INT START DB ( P )
INT ON INT ( N ) INT ON SVC ( N ) INT START CR ( P )
INT ON OVER LMT ( N ) INT ON INS ( N ) INT NEXT STMT ( N )
INT ON COLL FEES ( N ) INT ON RECOV FEES ( N ) INT ON LATE CHG ( N )
INT ON USER FEE 1 ( 0 ) INT ON USER FEE 2 ( 0 ) INT ON USER FEE 3 ( 0 )
INT ON USER FEE 4 ( 0 ) INT ON USER FEE 5 ( 0 ) INT ON USER FEE 6 ( 0 )
YEAR BASE ( 0 ) ACCRUAL METHOD ( D ) INT CALCULATION ( 0 )
RATE TYPE ( F ) LIMIT INDICATOR ( Y )
RATE INDEX TBL ( 000 ) CAP REDUCTION ( 0000000 ) CAP INCREASE ( 0600000 )
FLOOR RATE 1 ( 0000000 ) CEILING RATE 1 ( 2000000 )
FLOOR RATE 2 ( 0000000 ) CEILING RATE 2 ( 9999999 )
LMT1 ( 00000000000000000 )

CURRENCY 840 NOD 2 PER ITEM NOD 2 PERCENTAGE NOD 7

PF1=ARMU PF2=ARMF PF3=ARAR PF4=ARAI PF5=ARMI PF6=INQUIRY

RELATED FIELDS
RATE TYPE Code that indicates the type of interest rate. The values are F, T,
V, U, and Z.

LIMIT INDICATOR Code that indicates how to handle tier limits. The values are:
N = Charge separate rate for balances within each
limit
Y = Charge rate at highest limit in which balance
falls. (Default)

RATE INDEX TBL Code that identifies the rate index within the associated Rate
Index Table that determines the base rate. The values are:
000 = Do not use a rate index
001–998 = Rate index number to use
999 = Interest free.

 The RATE INDEX TBL field is valid only for if the RATE TYPE is V
(variable) or U (tiered variable).

Section 6 - 20
 Interest Processing

CAP REDUCTION Maximum decrease in actual rate allowed for any one rate
change, regardless of the change in the index rate. If this field is
used, the Audit Exceptions Report (D15) lists exceptions with the
following message:
RATE EXCEEDED ALLOWABLE DECREASE

CAP INCREASE Maximum increase in actual rate allowed for any one rate change,
regardless of the change in the index rate. If a fixed interest rate is
used (RATE TYPE on ARMR02 is F), this field must be all nines.

If this field is used, the Audit Exceptions Report (D15) lists

exceptions with the following message:
RATE EXCEEDED ALLOWABLE INCREASE

FLOOR RATE 1 Minimum allowable interest rate for credit plans using this
Interest Table. CMS uses this rate if the plan balance is less than
or equal to the value in the LMT 1 field.

Regardless of the value of the rate index adjusted by the variance,

the actual interest rate assessed for credit plans using this Interest
Table will not fall below this percentage. If this field is used, the
Audit Exceptions Report (D15) lists exceptions with the
following message:
RATE EXCEEDED ALLOWABLE FLOOR RATE

 The value entered in FLOOR RATE 1 must be less than the value
in CEILING RATE 1.

CEILING RATE 1 Maximum allowable interest rate for credit plans using this
Interest Table. Regardless of the value of the rate index, adjusted
by the variance, the actual interest rate assessed for Plan
Segments using this Interest table will not be allowed to exceed
this percentage. If this field is used, the Audit Exception Report
(D15) lists exceptions as:
RATE EXCEEDED ALLOWABLE CEILING RATE

 The value entered in CEILING RATE 1must be greater than the

value in FLOOR RATE 1.

Section 6 - 21
CMS 8.0

FLOOR RATE 2 Minimum allowable interest rate for credit plans using this
Interest Table. CMS uses this rate if the plan balance is greater
than the value in the LMT 1 field.

CEILING RATE 2 Maximum allowable interest rate for credit plans using this
Interest Table.

LMT 1 Balance limit for FLOOR RATE 1 and CEILING RATE 1in whole
monetary amounts. If you are using only FLOOR RATE 1and CEILING
RATE 1, enter 999999999 in this field. If you are using both FLOOR
RATE 1-2 and CEILING RATE 1-2, the value of this field must be
greater than zero.

Notes___________________________________________

Section 6 - 22
 Interest Processing

ARMR PAGE 03

ARMR ( ) USER DEFINED TITLE PAGE 03 08/01/1999

INTEREST TABLE 13:42:21
ORGANIZATION 100 LOGO 000 TABLE 001 LAST MAINT 06/21/1999

INTEREST RATES -
RATE 1 ( 1000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT1 ( 99999999999999999 )
RATE 2 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT2 ( 00000000000000000 )
RATE 3 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT3 ( 00000000000000000 )
RATE 4 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT4 ( 00000000000000000 )
RATE 5 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT5 ( 00000000000000000 )
RATE 6 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT6 ( 00000000000000000 )
RATE 7 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT7 ( 00000000000000000 )
RATE 8 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 ) LIMIT8 ( 00000000000000000 )
RATE 9 ( 0000000 ) +/- ( + ) VARIANCE ( 0000000 )

CURRENCY 840 NOD 2 PER ITEM NOD 2 PERCENTAGE NOD 7

PF1=ARMU PF2=ARMF PF3=ARAR PF4=ARAI PF5=ARMI PF6=INQUIRY

RELATED FIELDS
RATE 1-9 Interest rate that CMS charges on account balances not greater
than the amount in the corresponding LIMIT1 to LIMIT8 field. Each
interest rate must be within the floor rate and the ceiling rate
assigned to the Interest Table.

The valid entries in RATE 1–9 depend on the rate type assigned to
the Interest table (RATE TYPE on ARMR02):

 If rate type is F (Fixed rate), enter an interest rate in RATE 1 only

and RATE 2-9 must be blank.
 If RATE TYPE is T (Tiered rate), you can enter up to nine
interest rates in RATE 1-9.
 If RATE TYPE is V (Variable rate), U (Tiered variable rate), or
Z (Interest free), do not enter any interest rates in RATE 1-9.

+/- Code that indicates whether the variance rate in the corresponding
VARIANCE field is added to or subtracted from the base rate to
determine the interest rate charged. The base rate is determined
by the index rate assigned to the Interest Table (RATE INDEX TBL
on ARMR02).

VARIANCE Variance rate that CMS adds to or subtracts from the base rate to
determine the interest rate charged. The base rate is determined

Section 6 - 23
CMS 8.0

by the index rate assigned to the Interest Table (RATE INDEX TBL
on ARMR02).

The valid entries in the VARIANCE fields depend on the rate type
assigned to the Interest Table (RATE TYPE on ARMR02):

 If RATE TYPE is V (Variable rate) you can enter a variance rate

in the first VARIANCE field. Do not enter any variance rate in
the remaining VARIANCE fields.
 If RATE TYPE is U (tiered variable rate), you can enter up to
nine variance rates in the VARIANCE fields.
 If RATE TYPE is F (Fixed rate), T (Tiered rate), or Z (Interest
free), do not enter any variance rates in the VARIANCE fields.

LIMIT1-8 Account balance limit for each of the corresponding interest rates
in the RATE 1 to RATE 8 fields or for each of the corresponding
variance rates in the VARIANCE fields. The valid entries in LIMIT1-8
depend on the rate type assigned to the Interest Table (RATE TYPE
on ARMR02):

 If RATE TYPE is F (Fixed rate) or V (variable rate), the amount

in LIMIT1 must be all nines and LIMIT2-8 must be blank.
 If RATE TYPE is T (Tiered rate) or U (Tiered variable rate), you
can enter up to eight account balance limits in the LIMIT1-8
fields. If you use the last line (RATE 9 or the corresponding
VARIANCE field), you do not need to enter a corresponding
account balance limit. CMS assumes the maximum amount.
 If RATE TYPE is Z (Interest free), do not enter any amounts in
the LIMIT1-8 fields.

Section 6 - 24
 Interest Processing

REVIEW

Match the term or field name to its description.

_____ 1. BSTFC A. Code that indicates how rates will be charged

when there are tier limits

_____ 2. INTEREST B. Code that indicates the number of days in the

OPTIONS year used for interest calculations

_____ 3. INT START DB C. Margin of points that CMS adds to or subtracts

from the index rate

_____ 4. INT NEXT STMT D. Minimum allowable interest rate for credit plans
using the Interest table

_____ 5. YEAR BASE E. Maximum increase in actual rate allowed for

any one rate change.

_____ 6. ACCRUAL F. Balance on which interest calculation will be

METHOD based (balance subject to finance charge)
_____ 7. LIMIT G. Code that indicates whether interest is
INDICATOR calculated daily or monthly

_____ 8. CAP INCREASE H. Field that controls whether CMS waives,

charges, or defers interest on new debits when
the beginning balance is zero

_____ 9. FLOOR RATE 1 I. Field that determines whether CMS will begin
interest calculations from the effective date or
the posting date of a debit

_____ 10. VARIANCE J. Flags that specify which BNP components will
comprise the BSTFC

Section 6 - 25
CMS 8.0

THE RATE INDEX TABLE

When calculating variable interest on a plan, CMS reads the Rate Index Table for
the index rate to which it will add (or from which it will subtract) a margin of
points that you have defined as a variance on the Interest Table.
The Rate Index Table is a centralized table of index rates, containing rates that are
used across Interest Tables. You can establish a Rate Index Table at the system
level or at the organization level.

 If processing days are the same for the system and the
organization, you must establish the Rate Index Table at the
system level; if processing days are not the same, you must
establish the table at the organization level.

In a variable-interest environment, it is extremely important that rate change

history be stored and available for use, not only for the purpose of disclosure of
rate changes to customers but also for the backdating of transactions. In CMS,
rate change history is stored on the Credit Plan Segment record for the number of
occurrences specified in the RECORD COUNT field of the Credit Plan Master
(ARMC01).

ADDING AND VERIFYING AN INDEX RATE

To add an index rate to the Rate Index Table, use screen ARRA. A new rate is
added as a pending rate and must be verified before it can go into effect.
Verification is performed on a special screen (ARHM) and can be done only by
someone other than the operator who entered the rate. If an error is detected
during verification, the original operator (or a selected substitute) can correct it,
using screen ARRM.

Section 6 - 26
 Interest Processing

ARRM PAGE 01

ARRA ( ) USER DEFINED TITLE PAGE 01 07/30/1999

RATE INDEX TABLE 16:00:24
ORGANIZATION 100
INDEX REVIEW DATE CURR RATE BEGIN DTE DESCRIPTION
LAST MAINT PEND RATE PEND DATE STATUS

004 ( ) 0000000 00000000 ( )

( ) ( ) N

CURRENCY 840 NOD 2 PER ITEM NOD 2 PERCENTAGE NOD 7

PF1=ARAN PF2=ARMN PF3=ARQN PF4=ARAE PF5=ARME PF6=ARMB

RELATED FIELDS
INDEX Identification number of the rate index within a Rate Index table.
The values are 001–998.

REVIEW DATE Date to review the pending rate. The Rate Index Table Review
Report (R47) lists all rate indexes that have a review date of
today, a review date that has passed, or a review date within the
next seven days.

The value entered into this field must be greater than today’s date.
The current rate (CURR RATE) remains in effect even if the review
date has passed.

CURR RATE Interest rate currently assigned to this rate index. This field is not
open for input. After you add a new rate index, CMS copies the
pending rate (PEND RATE) to this field if the rate index has been
verified and the pending date has been reached.

PEND RATE Pending interest rate assigned to the rate index. This interest rate
does not take effect until the following criteria are met:
 The rate index has been verified using the Rate Index Table
Verification screens (ARHM)
 The pending date (PEND RATE) has been reached.

Section 6 - 27
CMS 8.0

BEGIN DTE Date on which the current rate became effective. This field is
system generated; you cannot modify it.

PEND DATE Pending interest rate assigned to the rate index. This interest rate
does not take effect until the following criteria are met:
 The rate index has been verified using the Rate Index Table
Verification screens (ARHM)
 The pending date (PEND RATE) has been reached.

STATUS Verification status of the rate index. This field displays N (Not
verified) in add mode and you cannot change it on this screen.
CMS automatically changes the status when the rate index is
verified using the Rate Index Table Verification screens
(ARHM).

ARHM PAGE 01

ARHM ( ) USER DEFINED TITLE PAGE 01 05/04/1999

RATE INDEX TABLE VERIFICATION 18:38:33
ORGANIZATION 100
INDEX REVIEW DATE CURR RATE BEGIN DTE DESCRIPTION
LAST MAINT PEND RATE PEND DATE STATUS

002 03252000 TEST

03212000 1000000 03262000 ( N )

END OF RATE INDEX RECORDS

PF1=ARAN PF2=ARMN PF3=*TOP* PF4=*BOT* PF5=*BWD* PF6=*FWD*

Section 6 - 28
 Interest Processing

THE USURY TABLE

In a variable-interest environment, the Usury Table verifies the actual rates on
credit plan segments against the legal standards for interest in the states,
provinces, or countries where your customers reside or where your institution
does business. The system will verify rates only if the USURY flag on the
Organization record (ARMO02) is set to 1.
On the Usury Table, you can:
 Assign minimum and maximum usury limits to each PCT ID
 Assign a usury default rate to each PCT ID
 Specify what action the system is to take when a usury limit is exceeded.
The IDs on the Usury Table must match the PCT IDs on the Processing Control
Table(s). You can set up a single Usury Table at the system level or multiple
Usury Tables at the organization level.

ARSM PAGE 01

ARSM ( ) USER DEFINED TITLE PAGE 01 07/27/1999

USURY TABLE 16:23:57
ORGANIZATION 100 DATE LAST MAINT 07/21/1999
ID USURY MINIMUM USURY MAXIMUM DEFAULT RATE INDICATOR
( AL ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( AK ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( AP ) ( 0000000 ) ( 1000000 ) ( 0030000 ) ( D )
( AR ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( FL ) ( 0005000 ) ( 3500000 ) ( 0075000 ) ( D )
( YH1 ) ( 0000001 ) ( 9900000 ) ( 2000000 ) ( D )
( YH2 ) ( 0000001 ) ( 9900000 ) ( 2000000 ) ( D )
( YH3 ) ( 0000001 ) ( 9900000 ) ( 2000000 ) ( D )
( YH4 ) ( 0000001 ) ( 9900000 ) ( 2000000 ) ( D )
( YH5 ) ( 0000001 ) ( 9900000 ) ( 2700000 ) ( D )
( YH6 ) ( 0000001 ) ( 9900000 ) ( 2700000 ) ( D )
( ID ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( IT ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( IL ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( FH ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( DJB ) ( 0200000 ) ( 2100000 ) ( 2100000 ) ( D )
( KS ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
( KY ) ( 0000000 ) ( 0000000 ) ( 0000000 ) ( D )
CURRENCY 840 NOD 2 PER ITEM NOD 2 PERCENTAGE NOD 7
PF1=ARMU PF2=ARQF PF3=ARQR PF4=ARSD PF5=ARQA PF6=ARMC

RELATED FIELDS
ID Identifier assigned to the state, province, or country associated
with the corresponding usury limits. This ID must also be
established as a PCT ID in a Processing Control Table.

Section 6 - 29
CMS 8.0

USURY MINIMUM Lowest interest rate allowed by the usury regulations governing
this state, province, or country. Zero is a valid entry in this field.

USURY Highest interest rate allowed by the usury regulations governing

MAXIMUM this state, province, or country.

DEFAULT RATE Default interest rate CMS will use when the interest rate assigned
to an account is less than the usury minimum rate or greater than
the usury maximum rate.

The default interest rate must be greater than the USURY MINIMUM
and less than the USURY MAXIMUM.

 The DEFAULT RATE is required if the INDICATOR value is D

(Default).

INDICATOR Code that specifies the rate to apply when the interest rate
assigned to an account is below the usury minimum rate or above
the usury maximum rate. The values are:
D = Default rate; use the DEFAULT RATE when the
interest rate is less than the usury minimum
rate or greater than the usury maximum rate
(Default)
M = Minimum or maximum rate; use the USURY
MINIMUM when the interest rate is less than the
usury minimum rate, and use the USURY
MAXIMUM when the interest rate is greater than
the usury maximum rate.

 The Usury Table screens ARSM02 to ARSM05 are identical to

the sample ARSM01 screen. Use these screens to enter
additional usury limits as needed.

Section 6 - 30
 Interest Processing

ACCOUNT CONTROL TABLE INTEREST-RELATED FIELDS

You can set up as many as 998 Account Control Tables at each processing level
and associate them with PCT IDs by means of the Processing Control Table. The
Account Control Table contains several parameters that affect the processing of
interest. Using the Account Control Table, you can specify:
 The number of grace days
 The application of grace days to different types of plans
 The minimum interest amount
 The review level for automatically waiving small amounts of interest and the
maximum amount of interest waived
 Phantom cash and retail plans for rate disclosure purposes
 The number of variable rate disclosure days
 Accrual of interest on charged-off accounts
 Interest Table Override interest options
 Immediate dormant account ratification.

GRACE DAYS AND ACCOUNT GRACE DAY BALANCE

In addition to specifying the number of grace days, you can determine whether
grace days will apply to all plan segments on an account or only to certain types
of plans. If you choose, you can use the ACCT GRACE DAY BAL field on the
Account Control Table to override the GRACE DAY BALANCE field on the Credit
Plan Master (ARMC01).

MINIMUM INTEREST, MINIMUM INTEREST WAIVE LEVEL, AND MAXIMUM AMOUNT

CMS will automatically waive small amounts of interest based on values in the
MINIMUM INTEREST, MIN INT WAIVE LVL, and MAXIMUM AMOUNT fields on the Account
Control Table.
Example 1: Interest is waived at the account level.
Assume that the minimum interest amount is $.50, the waive level is A (account),
and the maximum amount to be waived is $.25. If the system calculates $.35
interest on the entire account, then interest of $.50 will be assessed on the
account. If the system calculates $.15 interest on the entire account, then interest
on the account will be waived.

Section 6 - 31
CMS 8.0

Example 2: Interest is waived at the plan level.

Assume that the minimum interest amount is $.50, the waive level is P (plan), and
the maximum amount to be waived is $.25. If the system calculates $.35 interest
on a plan, then interest of $.50 will be assessed on the plan. If the system
calculates $.15 interest on the plan, then interest will be waived on the plan. Each
plan is tested individually for waiving of interest.
You can also define the MAXIMUM BAL on which interest will be waived.

DISCLOSURE AND RATIFICATION PARAMETERS

In some bankcard environments, there is a legal requirement to disclose the

interest rate of a plan when no plan segment exists on the account. On the
Account Control Table, you can specify a “phantom” cash plan and a “phantom”
retail purchase plan for disclosure purposes. The numbers of these plans will then
default to any new Account Base Segment (ARMB04) but are maintainable at the
account level.
In many environments, a rate change cannot go into effect unless the customer has
been notified of the change and ratified it. If your institution is required to notify
customers of a pending rate change, you can enter the number of notification days
in the VAR RATE DISCLOSURE DAYS field on the Account Control Table. If a rate
change is made and 60 days notification is required, the 60-day notification period
begins with the first statement after the rate change becomes effective. On this
and the next statement, notification is given of the pending rate change. Sixty
days later, the customer’s rate changes, based on ratification. Disclosure occurs
on the statement to show that the rate change occurred.
Example 1: Notification of a pending rate change is not required.
The base index rate changed on the Rate Index Table, effective June 1. Statement
ratification is in effect. The account is scheduled for a statement on 6/15. At the
end of batch processing on 6/15, when the date rolls to 6/16, the new rate
becomes effective for the account. The fact that the rate changed is disclosed on
the 6/15 statement.
Example 2: Sixty days notification of a pending rate change is required.
Assume that the base index rate changed on the Rate Index Table, effective June 1
and that statement ratification is in effect. The account is scheduled for a
statement on 6/15. On the 6/15 statement, the first notification of the pending rate
change and rate change effective date occurs, and the 60-day countdown begins.
On the 7/15 statement, the second notification occurs. At the end of batch
processing on 8/15, when the date rolls to 8/16, the new rate becomes effective for
the account. The fact that the rate changed and the date that the change became
effective are disclosed on the 8/15 statement.

Section 6 - 32
 Interest Processing

RATIFICATION METHODS

The ratification method for a PCT ID is specified in the RATF field on the
Processing Control Table (ARMF01). CMS provides the following types of
ratification:
 Debit ratification (option D). The rate change occurs immediately after the
first customer-generated debit.
 Grandfathered (option G). The rate does not change for existing credit plan
segments.
 Debit after billing cycle (option M). The rate change takes effect when the
first customer-generated debit occurs after the billing cycle.
 Normal (option N). The rate change occurs immediately.
 Cycle (option S). The rate takes effect when the account cycles.
On the Account Control Table, the IMMEDIATE DORMANT ACCOUNT RATIFICATION
field determines how ratification will be performed if a rate change occurred
while a reactivated account was dormant.

ACCRUAL OF INTEREST ON CHARGED-OFF ACCOUNTS

If you choose, you can stop the accrual of interest once an account has been
charged-off. The value that you enter in the CO ACCR INTEREST field on the
Account Control Table will default to all new Account Base Segments but is
maintainable at the account level.

INTEREST TABLE OVERRIDE INTEREST OPTIONS

An ITO on a Credit Plan Master points the plan to a special Interest Table for a
period of days or months or until a specific calendar date has been reached. You
can determine whether only certain interest options on the special Interest Table
will be used or whether all options on the table will be used.

Section 6 - 33
CMS 8.0

ARMY PAGE 02

ARMY ( ) ** USER DEFINED TITLE ** PAGE 02 11/15/2001

ACCOUNT CONTROL TABLE 06:36:18
ORGANIZATION 000 LOGO 000 TABLE 001 LAST MAINT 09/06/2001

PMT DUE DAYS ( 99 ) PMT DUE DATE ( 00 ) GRACE DAY BAL ( D )

MINIMUM INTEREST ( 000000050 ) GRACE DAYS ( 25 )
MIN PYMT: AMT ( 000000015 ) PERCENT ( 0100000 ) IND ( 4 )
MIN INT WAIVE LVL ( A ) MAXIMUM AMOUNT ( 000000025 )
MAXIMUM BAL ( 00000000000001001 )

CASH LIMIT FLAG ( P ) % OR AMT ( 00000000000750000 ) CONS PMT PLAN ( 00000 )

LOAN LIMIT FLAG ( P ) % OR AMT ( 00000000000500000 ) CONS INS PLAN ( 00000 )
FEE DISCL IND ( 1 ) CASH PLAN ( 10001 )
FEE DISCL CYCLE ( 2 ) RETAIL PLAN ( 10002 )

CO ACCR INTEREST ( 1 ) SECURITY % ( 100 )

VAR RATE DISCL DAYS ( 060 )

IMMED DORMANT ACCOUNT RATIFICATION ( 1 )
ITO INTEREST OPTIONS ( 1 )

CURRENCY 840 NOD 2 PER ITEM NOD 3 PERCENTAGE NOD 7

PF1=ARMU PF2=ARMF PF3=ARMR PF4=ARMI PF5=ARVM PF6=INQUIRY

RELATED FIELDS
GRACE DAY BAL Code that indicates which types of credit plans allow the grace
days option. If you enter a value in this field, it overrides the
Credit Plan Master record. The values are:
A = Cash, retail, and loan plan types (A, B, C, K,
L, R, and T) allow grace days
B = Cash and retail plan types (A, B, C, K, R, and
T) allow grace days
C = Cash plan types (C, A, and T) allows grace
days
D = Use the GRACE DAY BALANCE field on the
Credit Plan Master (ARMC01)
E = Retail and loan plan types (R, B, L, and K)
allow grace days
F = Cash and loan plan types (C, A, L, and T)
allow grace days
L = Loan plan type ( L ) allows grace days
N = Do not use grace days
R = Retail plan types (R, B, and K) allow grace
days.

Section 6 - 34
 Interest Processing

GRACE DAYS Number of days from the cycle date by which the customer can
pay the total beginning balance without being assessed a finance
charge on the prior cycle balance. The values are:
00–31 = Number of days (Default is 00)
99 = Next cycle date.

MINIMUM Minimum interest amount assessed on accounts that are charged

INTEREST interest.

MIN INT WAIVE Code that indicates the level at which CMS calculates a minimum
LVL interest amount to waive or indicates that interest is not waived.
The values are:
N = Do not waive interest (Default)
A = Calculate at account level
P = Calculate at plan level.

MAXIMUM AMT Maximum amount of interest waived in monetary units and

subunits.

Example 1: If working with U.S. dollars, enter $5.25 as

000000525

Example 2: If working with French francs, enter Fr3,90 as

000000390.

MAXIMUM BAL Maximum balance for which interest is waived in monetary units
and subunits.

Example 1: If working with U.S. dollars enter $150.50 as

00000000000015050

Example 2: If working with French francs, enter 172,70 as

00000000000017270.

This balance must be greater than the BILL THRESH amount on the
Logo record (ARML14).

Section 6 - 35
CMS 8.0

CASH PLAN Number that identifies the Credit Plan Master record used as the
default cash plan (also referred to as phantom plan). When no
cash plan exists on an account, CMS discloses the cash interest
rate from the phantom plan. CMS identifies a phantom plan using
record number 000 (REC on ARMA01).

RETAIL PLAN Number that identifies the Credit Plan Master record used as the
default retail plan (also referred to as phantom plan). When no
retail plan exists on an account, CMS discloses the retail interest
rate from the phantom plan. CMS identifies a phantom plan using
record number 000 (REC on ARMA01).

CO ACCR Code that indicates whether to accrue interest on charged-off

INTEREST accounts. The values are:
0 = Do not accrue interest (Default)
1 = Accrue interest.
CMS automatically defaults this value to new accounts
(CHARGED-OFF ACCRUED INTEREST on ARMB04).

VAR RATE DISCL Number of days to add to the next statement date to determine
DAYS when the rate changes for a credit plan. This number reflects the
number of days of pre-notification required before a rate change
goes into effect.

IMMED Code that indicates how to determine the interest rate when a
DORMANT dormant account is reactivated. When an account is dormant, any
ACCOUNT debit activity reactivates the account. The interest rate to which
RATIFICATION the account is pointing may have changed since the account went
dormant. This code indicates whether the new rate becomes
effective immediately upon reactivation or if the last rate that was
in effect prior to the account going dormant will be in effect until
the most recent rate is ratified. The values are:
0 = Use prior rate until new rate is ratified
(Default)
1 = Use the new rate immediately.

Section 6 - 36
 Interest Processing

ITO INTEREST Code that indicates whether CMS uses all parameters on the
OPTIONS Interest table to which the ITO (Interest Table Override) is
pointing or only certain parameters on the Interest table. The
values are:
0 = Do not use all the parameters on the Interest
table to which the ITO is pointing. Use only
the RATE TYPE, RATE INDEX TABLE, FLOOR
RATE, CEILING RATE, CAP REDUCTION, CAP
INCREASE, RATE 1–9, VARIANCE 1–9, and
LIMIT1–8 from the ITO Interest table, and use
all the parameters from the normal Interest
table associated with this plan. (Default)
1 = Use all the parameters indicated on the
Interest table to which the ITO is pointing.
This Interest table is determined by the
issuance ID for bankcard accounts (ISSUANCE
ID on ARMB03) or the residence ID for
revolving/retail accounts (RESIDENCE ID on
ARMB03).

Notes___________________________________________

Section 6 - 37
CMS 8.0

REVIEW

1. In a variable rate environment, what table contains the rates to which a margin of
points (variance) may be added? Circle the correct answer.

a. The Rate Index table

b. The Usury table

2. In a variable rate environment, what table verifies the actual rates on credit plans
against the legal standards for interest? Circle the correct answer.

a. The Rate Index table

b. The Usury table

3. What three fields on the Account Control table are used to waive small amounts of
interest automatically?

______________________________
______________________________
______________________________

4. What four fields on the Account Control table affect disclosure and ratification?

______________________________ ______________________________
______________________________ ______________________________

Section 6 - 38
 Interest Processing

INTEREST PROCESSING OVERRIDES

The Processing Control Tables, Logo records, Credit Plan Masters, and Interest
Tables that you establish in CMS will control normal or default interest
processing for your institution. You can override default interest processing if
you have a need to do so. Interest processing overrides allow you to do the
following:
 “Re-price” an account temporarily in order to offer a more competitive rate
 Tailor interest rates to preferred customers
 Offer introductory or “teaser” rates on particular credit plans.
Overrides exist at both the account and the plan levels.

ACCOUNT-LEVEL OVERRIDES

To override an Interest Table at the account level, you can use the PRICING CTRL
field and/or the PCT LVL OVRRIDE field on the Account Base Segment (ARMB03).
You can also enter Account Base Segment RATE VARIANCES on ARMB04.
The PRICING CTRL allows you to enter a new PCT ID for the account. The new
PCT ID may be taken from the same Processing Control Table as the original
PCT ID or from a different Processing Control Table at the same processing level.
The PCT LVL OVRRIDE allows you to override the processing level of the original
PCT ID.
Using either of these fields, or a combination of the two, you can temporarily
point an account to a different Interest Table (or set of Interest Tables) from the
one it would ordinarily use.

 When you use these overrides, you also override parameters

on the original Account Control Table, Service Charge/Fee
Table, and Insurance Table to which the account originally
pointed.

Using the RATE VARIANCES on the Account Base Segment, you can add or subtract
points from the interest rates to which the account would ordinarily be subject.
ARMB04 contains 12 sets of variance fields that correspond to the 12 RTOIs on
the Processing Control Table.

Section 6 - 39
CMS 8.0

ARMB PAGE 03

ARMB ( ) USER DEDFINED TITLE PAGE 03 06/15/1999

ACCOUNT BASE SEGMENT 14:00:00
ORGANIZATION 800 LOGO 850 ACCOUNT 0008008500000000001
RESIDENCE ID ( FL ) ISSUANCE ID ( FL ) SECURED 0 COLLATERAL 0
PRICING CTRL ( ) START DATE ( 00000000 ) EXPIRATION DATE ( 00000000 )
PCT LVL OVRRIDE ( ) START DATE ( 00000000 ) EXPIRATION DATE ( 00000000 )
OWNERSHIP FLAG ( 0 ) OFFICER ( )
WAIVE: INT ( 0 ) LATE CHARGES ( 0 ) LATE NOTICES ( 0 ) MEMBERSHIP ( 0 )
LTR ( 0 ) OVERLIMIT FEE ( 0 ) OVLM NOTICE ( 0 ) NSF 1-5 ( 0 )
SVC FEES: 1 ( 0 ) 2 ( 0 ) 3 ( 0 ) 4 ( 0 ) 5 ( 0 )
6 ( 0 ) 7 ( 0 ) 8 ( 0 ) 9 ( 0 ) 10 ( 0 )
USER FEES 1 ( 1 ) 2 ( 1 ) 3 ( 1 ) 4 ( 1 ) 5 ( 1 ) 6 ( 1 ) CRD FEE ( 0 )
SKIP PAYMENT ( Z ) FREQ SHOP IND ( Y ) FRAUD REPORT ( Y ) CASH LMT ( Y )
PREPAY ALLWD ( 0 ) PREPAY MTHS ( 00 ) PREPAY ZERO ( 0 ) LOAN LMT ( Y )
DELQ CNTRS: PAST ( 000 ) 30 DAY ( 000 ) 60 DAY ( 000 ) 90 DAY ( 000 )
120 DAY ( 000 ) 150 DAY ( 000 ) 180 DAY ( 000 ) 210 DAY ( 000 )
24 MONTH HISTORY
01/13 02/14 03/15 04/16 05/17 06/18 07/19 08/20 09/21 10/22 11/23 12/24
DELQ 0 0 0 0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0 0 0 0
PYMT ( N ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ()
( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( ) ( )

PF1=ARMU PF2=ARIB PF3=ARIQ PF4=ARMN PF5=ARME PF6=INQUIRY

RELATED FIELDS
PRICING CTRL Code that identifies an existing Processing Control Table (PCT
ID) used to establish special pricing controls for the account. The
PCT ID in this field determines the Account Control Table,
Service Charge/Fee Table, Insurance Table, and Interest Tables
for the account during the period specified by the START DATE and
EXPIRATION DATE fields.

 Enter ### to delete a value in the PRICING CTRL field.

PCT LVL Code that indicates whether a processing control level override is
OVRRIDE in effect, and if so, the level for the PCT ID in the PRICING CTRL
field. This field enables you to override the processing control
level assigned to the account in the Logo record (PROC CONTROL
LEVEL on ARML14). The values are:

Space = No override in effect (Default)

L = Logo
O = Organization
S = System.

Section 6 - 40
 Interest Processing

ARMB PAGE 04

ARMB ( ) USER DEFINED TITLE PAGE 04 04/15/1999

ACCOUNT BASE SEGMENT 14:15:47
ORGANIZATION 100 LOGO 152 ACCOUNT 0004441501001520003

RATE VARIANCES CURRENT PENDING EFFECTIVE

1 + 0000000 ( + 0000000 ) ( )
2 + 0000000 ( + 0000000 )
3 + 0000000 ( + 0000000 )
4 + 0000000 ( + 0000000 )
5 + 0000000 ( + 0000000 )
6 + 0000000 ( + 0000000 )
7 + 0000000 ( + 0000000 )
8 + 0000000 ( + 0000000 )
9 + 0000000 ( + 0000000 )
10 + 0000000 ( + 0000000 )
11 + 0000000 ( + 0000000 )
12 + 0000000 ( + 0000000 )

CHARGED-OFF ACCRUED INTEREST ( 0 )

DEFAULT CASH / RETAIL PLAN ( 00005 ) ( 00002 )
CONTROLLING PLAN OVERRIDE ( )
FIXED PAYMENT AMOUNT/PERCENT ( 00000000000 )
CURRENCY 840 NOD 2 PER ITEM NOD 2 PERCENTAGE NOD 7
PF1=ARMU PF2=ARIB PF3=ARIQ PF4=ARMN PF5=ARME PF6=INQUIRY

RELATED FIELDS
CURRENT 1-12 Two-part field that identifies current variances 1–12 and a sign
indicator for each variance. The first part of each field is a sign
indicator (+ or –) that indicates whether the current variance is
added to or subtracted from the rate.The second part of each field
is the current rate variance for the credit plans associated with
each rate table occurrence.

 The CURRENT fields are open for input only during the add
mode (ARAB).

PENDING 1-12 Two-part field that identifies pending variances 1–12 and a sign
indicator for each variance. The first part of each field is a sign
indicator (+ or –) that indicates whether the pending variance is
added to or subtracted from the rate. The second part of each field
is the pending rate variance associated with each rate table
occurrence.

 The PENDING fields are open for input only during the
maintenance mode (ARMB).
EFFECTIVE Last date on which the current variances are effective for credit
plans.

Section 6 - 41
CMS 8.0

 Ratification is based on the ratification flag on the Processing

Control Table (RATF on ARMF01).

PLAN-LEVEL OVERRIDE

You can override default interest processing at the plan level by using the
INTEREST TABLE OVRRDE field on the Credit Plan Master (ARMC01).

 The INTEREST TABLE OVRRDE and other interest-related fields

on the Credit Plan Master are covered in Section 5 of this
manual.

THE INTEREST PROCESSING HIERARCHY

CMS assigns priorities to default interest processing and to those features that
override it. These priorities create a hierarchy of interest processing in the
system, as illustrated below:
Highest Priority

ARMC CREDIT PLAN MASTER PAGE 01

INTEREST TABLE OVRRDE

ITO EXP

ARMB ACCOUNT BASE SEGMENT PAGE 03

PRICING CTRL
PCT LVL OVRRIDE

ARMB ACCOUNT BASE SEGMENT PAGE 04

RATE VARIANCES

ARMB ACCOUNT BASE SEGMENT PAGE 03

RESIDENCE ID ( )

or

ISSUANCE ID ( )

Lowest Priority

Section 6 - 42
 Interest Processing

METHODS OF DEFERRING AND WAIVING INTEREST

CMS provides several different methods for deferring and waiving interest. Some
of these methods have already been presented in this section and in Section 5.
The following is a complete list of methods of deferring and waiving interest in
CMS:

Method Location Used to…

Credit Plan Master ARMC01 and 02 Define deferment-type plans.
Deferment Options Waive deferred interest.
Cancel deferments based on
delinquency.

Interest Table INT NEXT ARMR02 Defer or waive interest on new

STMT debits.

Account Control Table ARMY02 Waive small amounts of

WAIVE MIN INT LVL interest at the account or plan
level.

Account Base Segment ARMB03 Waive interest on an individual

WAIVE INT flag account.

Logo Block Code ARML07 and 08 Waive interest based on the

Matrix presence of a block on an
account.
Cancel deferments based on the
presence of a block code on an
account.

Section 6 - 43
CMS 8.0

REFERENCE LIST

ONLINE

 ARHM - Rate Table Verification

 ARMA - Credit Plan Segment
 ARMB - Account Base Segment
 ARMC - Credit Plan Master
 ARMF - Processing Control Table
 ARML - Logo record
 ARMR - Interest Table
 ARMY - Account Control Table
 ARRM - Rate Index Table
 ARSM - Usury Table

REPORTS

 D11 - Generated Transactions Journal

 D15 - Audit Exception Report
 D18 - Interest by PCT
 D20 - Balance by Rate Type
 R02 - Base Segment Maintenance
 R03 - Credit Plan Master Maintenance
 R11 - Rate Table Maintenance
 R47 - Rate Index Table Review Report

Section 6 - 44
 Interest Processing

REVIEW

1. What are the three account-level interest-processing overrides?

___________________________________
___________________________________
___________________________________

2. What is the plan-level interest processing override?

___________________________________

3. Which interest processing override has the highest priority?

___________________________________

4. On what five records can you find methods of deferring and waiving interest?

___________________________________
___________________________________
___________________________________
___________________________________
___________________________________

Section 6 - 45
CMS 8.0

Notes

Section 6 - 46