Version 1.0
Prepared by: @Lorraine Sebata
Approved by: @Lashanda Mackey
Reviewed date: 2025-09-04
Next review date: 2026-09-04
This SOP details the step-by-step process for identifying overdue loan repayments, calculating and applying late fees, and managing the collection process for these fees at Easyterms. Its purpose is to ensure consistent application of late fee policies, encourage timely repayments, mitigate financial risk, and maintain compliance with lending agreements.
This SOP applies to all Finance Department staff, Loan Officers, and any other personnel involved in monitoring loan repayments, applying late fees, and engaging in collection activities for all microfinance products offered by the company.
Loan Agreement Terms and Conditions
Collections Officer/Account Officer: Responsible for daily monitoring of repayment schedules, identifying overdue accounts, and the Loan Management System will generate late payment notifications.
Collections Department: Primary point of contact for the client; responsible for communicating with clients regarding overdue payments and late fees, negotiating repayment plans, and escalating persistent non-payment cases.
Operations Manager and Debt Recovery Officer: Reviews and approves escalated collection strategies; provides oversight for loan officers' collection activities.
Collections Department(if applicable): Manages severe delinquency cases, initiates formal collection procedures, and oversees legal actions if necessary.
5.1.1 Daily, access the Loan Management System (LMS) to generate a report of all loans with upcoming and past-due repayment dates.
5.1.2 Identify accounts that have missed their scheduled repayment by one day past the due date.
5.1.3 Verify the missed payment amount and the specific loan product terms related to late fees.
5.2.1 For each identified overdue account, calculate the applicable late fee strictly according to the terms outlined in the client's signed Loan Agreement and the Credit and Loan Approval Policy.
5.2.2 Ensure that the late fee calculation considers the principal amount overdue, the number of days overdue, and the stipulated late fee percentage or fixed amount.
5.2.3 The LMS (Loan Management System) will accurately apply the calculated late fee to the client's loan account. This means that the LMS will automatically add the appropriate late fee amount to the client's outstanding balance on their loan account, based on the specific late payment terms and conditions.
5.3.1 On the first day a late fee is applied, automatically or manually generate an "Initial Late Payment Notification" (Appendix A) to the client.
5.3.2 The notification should clearly state:
The original due date and amount.
The new outstanding balance, including the applied late fee.
The amount of the late fee.
Instructions on how to make the payment.
A warning about further late fees or collection actions if payment is not received promptly.
5.3.3 Send the notification via the agreed-upon communication channels (e.g., SMS, email, physical letter).
5.4.1 If payment is not received within [e.g., 3 days] of the initial notification, the Collections Officer assigned to the client will initiate direct contact (e.g., phone call, field visit if necessary).
5.4.2 During communication, the Collections Officer will:
Remind the client of the overdue payment and late fee.
Understand the reason for the delay.
Discuss potential repayment solutions or revised payment plans in accordance with the Debt Collection Policy (FIN-004).
Reiterate the consequences of continued non-payment.
5.4.3 Document all communication attempts and outcomes in the LMS.
5.5.1 The LMS will auto-detect outstanding payments. If the payment (including late fees) is not received within the agreed time of the initial notification, the Loan Officer will escalate the case to the Operations Manager.
5.5.2 The Branch Manager will review the case and may authorize more intensive collection efforts or refer the case to the Collections Manager (if applicable).
5.5.3 Further late fees may be applied periodically as per the Loan Agreement and Credit Policy for continued delinquency.
5.6.1 Upon receipt of payment, the Finance Officer/Accountant will verify the amount received against the outstanding balance (including late fees).
5.6.2 Accurately record the payment in the LMS, ensuring the late fee component is correctly allocated and the client's account is updated.
5.6.3 If a partial payment is received, apply it according to the company's payment allocation policy (e.g., late fees first, then interest, then principal).
Loan Management System (LMS) Reports (Overdue Accounts, Late Fee Application)
Client Loan Agreements
Initial Late Payment Notification
Communication Log (within LMS or separate record)
Payment Receipts
All Finance Officers/Accountants, Loan Officers, and Branch Managers will receive mandatory training on this SOP, the Credit Policy, and the Debt Collection Policy annually or upon significant revisions.
This SOP will be reviewed annually by the Finance and Operations Departments to ensure its continued effectiveness, compliance with regulatory requirements, and alignment with business objectives.