Overdraft Protection 

Purpose

Some banks do not allow their customers to overdraw their checking account, whether generally or under certain circumstances. If the available amount on a checking account is not sufficient at the end of a posting day to enable all incoming debit postings of that day to be executed, the returnable payment items are returned. This can, for example, mean that checks (PF) or debit memos are returned. In addition, there may be charges incurred for the return.

However, it would be possible that there is another available amount on another checking account of the same account holder that would be sufficient to enable the posting. In addition, the same account holder could have more accounts that could also be used. To ensure that the posting can be executed in this situation, the Overdraft Protection function enables you to control the other accounts from which funds are transfer posted, and in which sequence, to the checking account where the coverage is insufficient. This is done according to the product or account.

In the Overdraft Protection, the account to which a cash amount is transferred from one or more other accounts is called a funded account. The accounts from which the cash amount is transferred to the funded account are called funding accounts.

You are provided with the report Execute Overdraft Protection to determine the funded and funding accounts, and to initiate the fund transfer. You can, for example, schedule the report in end-of-day processing.

You assign funding accounts to a funded account by defining contract relationships in a master contract.

Prerequisites

Connection of External Systems

The Overdraft Protection function requires the connection of an account managing and payment order managing system to Master Contract Management (FS-MCM). In the standard system, Account Management (FS-AM) is connected in both cases. For more information, see Connection of External Systems.

Settings in the Customizing of Account Management (FS-AM)

·        To be able to use the function Overdraft Protectionfor a funded account, you have activated the  check object Overdraft Protection by choosing Item Management ® Basic Functions ® Transaction Types and Transaction Type Groups ® Maintain and Assign Transaction Types for Payment Items.

The check object Overdraft Protection runs the following checks.

·         Has a priority been assigned to the funded account.

·         Does the posting meant that the available amount is exceeded?

·         Is there an outstanding account order in the Posting Control Office (FS-PCO-AM) due to an overdraft protection problem on this account?

·        To control the continued processing of the payment item, if at least one of the checks is successful in the check object Overdraft Protection, you have entered the relevant settings under Item Management ® Posting Control Rules.

You can set up different system responses for the three checks of the Overdraft Protection check object. Proceed as follows:

...

                                                  i.       Define three error types in the IMG activity Define Error Types.

                                                ii.       Assign the corresponding result numbers in the IMG activity Assign Error Types.

                                               iii.       Specify for each error type the required first and final responses in the IMG activity Define Main Rules Set.

For more information, see Example: Posting Control Rules for Overdraft Protection.

·        To ensure that the transfer amount is held on the funding accounts until the posting is executed in Account Management, you have entered the corresponding settings under Item Management ® Prenote ® Assign Prenote Types with Hold Types.

·        To enable a payment order to be generated for the funds transfer from the funding to the funded account in Account Management, you have entered the relevant settings under Order Management ® Payment Order ® Assign a Payment Directive Type with Transaction Types and Medium/Payment Method.

·        To assign the same funding account to multiple funded accounts, you have specified whether the priority is to be shown or hidden in dialog processing for the funded account on the tab page for posting data in the product of the funded account under Product Management Product Definition Account Product Create or Change Account Product under the subobject attribute Posting Data. You cannot change the priority in the account.

Settings in the Customizing of Master Contract Management (FS-MCM)

·        You have created one payment directive type under General Settings ® Payment Directive Types ® Define Payment Directive Types, and you have assigned the process result category Overdraft Protection under Assign Payment Directive Types to Process Result Categories.

·        You have created one payment directive type under General Settings ® Hold Types ® Define Hold Types and you have assigned the process result category Overdraft Protection under Assign Hold Types to Process Result Categories.

·        Under Master Contract ® Overdraft Protection ® Define Types of Funding Accounts, you have defined the types of account that are allowed to be debited in overdraft protection.

·        Under Overdraft Protection ® Define Basic Amounts, you have specified whether a minimum amount is to be taken into account in the calculation of the transfer amount, and which level amount is to be taken into account if the transfer amount is to be calculated incrementally.

·        Under Overdraft Protection ® Define Transfer Rules, you have specified whether the transfer amount is to be the same as the overdraft amount or whether fixed amounts are to be transferred in increments. In addition, you specify whether and when overdraft protection charges are to be taken into account and which exception handling is to apply if the available amount on the funding account is insufficient to cover the transfer amount.

·        Under Overdraft Protection Assign Types of Funding Accounts with Transfer Rules you have specified which transfer rules are to apply for which types of funding account.

·        To assign the same funding accounts to multiple funded accounts, you have specified the value range for the priority of the funded accounts under the feature attributeOverdraft Protection, under Product Management ® Product Definition ® Master Contract Products ® Create or Change Master Contract Product.

Execute a Mass Run for Overdraft Protection

The conditions named in the section on integration in the system documentation of the report Execute Overdraft Protection have been met.

Process Flow

Master Data

...

       1.      Create a master contract. Choose a product whose feature attribute Overdraft Protection is activated. For more information, see Master Contract.

       2.      Choose the Contract Relationships tab page and assign the funded and funding accounts. For more information, see Editing Contract Relationships for Overdraft Protection.

       3.      Check the specifications on the Overdraft Protection tab page. For more information, see Editing Overdraft Protection.

Flow Data

...

       1.      Execute the postings that are due during the posting day for the current posting date of the payment transaction on the funded account in Account Management (FS-AM). For more information, see Creating a Payment Item.

You normally post the payment items first that cannot be returned.

       2.      When the payment items are posted, the system runs formal and material checks. If one of the above three checks in the Overdraft Protection check object finds at least one error during the material checks, the system displays the dialog box Log Output.

       3.      To post the payment item despite the error, because, for example, the payment item cannot be returned, choose  Force.

To continue processing the payment item according to your settings in the posting control rules, choose  Rule Set. If you are using the Posting Control Office (FS-PCO-AM), the system generates an account order for each posting day and account, which is in the Postprocessing/Posting Control (05) subcategory. You can display the account order in the Posting Control Office to monitoring the processing progress.

Mass Run

The system executes the mass run for the Overdraft Protection at the scheduled time, for example, during end-of-day processing.

Result

If the available amount on the funding accounts was sufficient, all postings were able to be executed without overdrawing a funded account.

If the available amount on the funding accounts was insufficient, the amount by which the available amount on the funded account was exceeded was able to be kept to a minimum.

Example

See Example: Posting Control Rules for Overdraft Protection.