[Sean]

Hi everyone, not sure if there is a ‘right’ or ‘wrong’ answer to this so just looking for what the majority of people do if possible.

We allow a loan to run to Day 95 in arrears before we default the loan. As part of the default process we add the accrued interest to the balance outstanding. So I have £1,000 loan and the interest that has accrued is £100. We freeze the loan at this stage and have a single amount due on file – £1,100. Interest at this point stops accruing and we then use third party recovery etc.

We eventually move the loan to Bad Debt Write Off (BDWO) at day 365 once it has been fully provided for.

Having spoken recently to another CU they said that they only default the balance due and effectively let the interest go. We use the Sercle system currently so adding interest on is fiddly.

Does anyone have a strong opinion on this? Maybe there is a right way from an accounting perspective? On one hand, adding interest means that if they do begin to pay we benefit from that, but on the other we are increasing our provisioning costs by the interest amount.

Sean Lynch - CEO Citysave Credit Union Ltd Mobile: 07787431350 E-mail: Sean.Lynch@citysave.org.uk

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[Samantha]

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Samantha Owen Finance Manager Unify Credit Union LTD Email : finance@unifycu.org

[Sean]

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Sean Lynch - CEO Citysave Credit Union Ltd Mobile: 07787431350 E-mail: Sean.Lynch@citysave.org.uk

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