Rescinding a Consumer Loan 
Use
You use this function to rescind a loan from category Consumer Loan (340) within the function Change Consumer Loan.
Rescinding a loan contract renders it ineffective. The borrower does not incur any costs.
The business operation Rescission can have the following statuses:
· Created
The contract is only flagged for rescission at first.
The system only executes the business operation when the borrower has paid back the rescission balance on time.
· Completed
The receivable is cleared directly by bank collection or the borrower has already repaid the rescission balance.
Integration
This function is related to the following functions:
The rescission is only possible within the rescission period. If the rescission period has passed and your company has not recognized the rescission, taking any goodwill agreements into consideration , you can suggest that the borrower pay off the loan. You will find this function in the Workplace for Business Operations.
A payoff terminates a loan contract prematurely. The borrower incurs costs, such as interest, charges and a prepayment penalty.
· Delete Rescission Indicator in Consumer Loan
If the borrower has not transferred the money on time, this function resets the rescission entered.
· Automatic Processing of Overpayments for Consumer Loans
If the borrower has transferred the rescission balance on time, this function triggers the execution of the rescission created and clears the receivable from the rescission with the transfer.
Prerequisites
· If you want to use the release function in connection with the rescission, you must set up the release for the release object VDARL (Loan Master Data) and for the corresponding product type in the Customizing settings for Loans Management. For more information, see Release.
· You need to have defined the Rescission Period in Days and the Payoff Period in Days for the underlying product under Business Operations ® Business Operation: Rescind Contract. For more information, see Product.
· A loan from category Consumer Loan (340) must exist in the system.
Scope of Functions
· You can rescind a loan with status application and contract offer at any time, since in these cases a legally binding loan contract has not yet been concluded. You only need to enter a reason for non-acceptance.
· You can only rescind a loan with status Contract within the rescission period. The rescission period is specified by the underlying product.
If the rescission period has passed, the rescission must be released by an employee with the appropriate authorization.
· If the loan has already been partially or fully disbursed on the date when the rescission is declared, the rescission balance must be repaid within the payoff period, either by bank collection from the checking account of the borrower or by a bank transfer made by the borrower. The payoff period is defined in the underlying product.
¡ If the payment method entered for the rescission balance is Direct Payer, when you enter the rescission the system only creates it with status Created. This means it sets the rescission indicator for this loan. As long as a loan is displayed with this indicator, the system excludes this from the debit position run (function Post planned records or Post individual loan). The borrower must now repay the rescission balance within the payoff period.
§ If the payoff amount is not received on time, the rescission is no longer effective and the loan contract is still valid. The report Delete Rescission Indicator in Consumer Loan, which is run daily, checks whether the payoff amount has been paid. It also deletes the rescission indicator in the loan.
§ If the payoff amount has been made on time, an overpayment is created in the loan. This is recognized by the Automatic Processing of Overpayments for Consumer Loans, which is also run daily. The report triggers the execution of the cancellation and clears the cancellation balance with the overpayment.
¡ If the payment method of the payoff is not Direct Payer, when you enter a rescission the system executes it immediately and clears the receivable by bank collection, using the payment method and the bank details entered for the loan.
· The system executes a rescission by completing the following steps:
¡ It rescinds the credit life insurance, if this exists.
The credit life insurance is also rescinded with the loan contract, since the purpose of this transaction, to secure the loan, no longer applies.
¡ It reverses the disbursement and creates a receivable.
¡ It reverses any payment installments already posted.
It converts the payments paid up unto that point by the borrower into overpayments and takes these into consideration when calculating the rescission balance.
¡ It clears the rescission balance either by bank collection or by the overpayment.
¡ It saves the loan in status Contract Withdrawal.
Activities
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1. In the function Change Consumer Loan choose Edit ® Rescind Loan.
2. Enter the required data and choose Check Run.
The check run determines in advance whether a cancellation is possible and calculates the rescission balance amount.
3. If you want to create or execute the rescission, choose Execute.