Reversing payments
How to undo payments and reflect changes across records.
If an account has insufficient funds or a customer cancels a transaction, the payment processor will be unable to complete the payment. However, due to the standard three-day processing time, the transaction failure might not be visible immediately. When this is the case, payment processors will notify Secure Payments. From there, Secure Payments needs to communicate with LMS (or the system you use to track and manage your accounts) by reversing the payment. This article will explain how to manually reverse a payment and how to automate the process.
Individual payment reversal
If failed payments are a rarity, you can use the manual tools LoanPro provides to edit or reverse a payment.
Edit a payment
To edit a payment, navigate to Servicing > Payments inside of a loan. Click the pencil icon to the right of an individual payment. This will bring up the normal log payment section.
If you are editing a payment that is associated with a Secure Payments transaction you will get a pop up warning:
“Editing a payment will not affect the associated Secure Payments transaction. Additionally, historical reports will likewise be unaffected. If you need Secure Payments and Reports to reflect this change, it is recommended to reverse the existing payment and process a new one instead.
Click 'Save' after editing the payment, enter in a reason for the edit, and click ‘Save Changes.’
Reverse a payment
To reverse a payment, navigate to Servicing > Payments inside of the loan. Reversed payments will appear differently than active payments. To reverse an active payment, click the back arrow icon. This will bring up the reverse payment dialog box.
- Reversal reason: Choose the reason for reversing the payment. The options are:
- Check bounced
- Clerical error
- Insufficient funds
- Nacha error code: When selected, a new field will appear to select the Nacha error. LoanPro also provides settings that will, depending on the Nacha return code selected, perform actions at the company level. For more information on configuring these settings refer to the Payment Return Actions article.
- Other
If the payment being reversed was processed by a CPA-005 processor, the list of return codes will be the Canada Return Codes.
- Reversal comment: Enter any open text comment about the reversal.
- Charge reversal fee: Choose whether a fee should be charged as a result of the payment reversal. A manual payment reversal fee isn’t a standard fee in LoanPro. If you choose ‘Yes’ from the dropdown, you will be taken to Servicing > Charges once the reversal is logged so that you can enter a fee to be charged.
If the transaction being reversed is tied to a payment profile (Merchant Services were used in posting the payment), the ‘Reverse Merchant Transaction’ option will appear. If selected ‘Yes’, the following will occur:
- For credit/debit card transactions: The ‘Merchant Service’ transaction will be voided if the transaction has not yet been batched by the processor. If it has been batched by the processor then a separate transaction must be manually sent to the customer’s account providing a “net-void” between the two transactions.
- For bank account transactions: The transaction will be voided in Secure Payments; however, if you are doing offline processing then you’ll need to update any offline linked processor of this.
Once the payment is reversed, you won’t be able to edit it and it will no longer apply to the loan or lease. It will still show in the payment history. The payment statistics will capture the payment allocation at the time of reversal which can be seen in Reports > Transactions > Payment Reversal on the export list to know how the payment applied at the time of reversal.
Automated payment reversal
If payment reversals occur often, you can streamline and automate the process with automatic payment reversals. When Secure Payments gets word from a payment processor that any payments have failed, it sends a message back to LMS, where the payments will be reversed on borrowers' loans and fees can be assessed.
This function is only natively available if you are using Secure Payments in association with LoanPro. If you are using Secure Payments's API with your own application, you will need to use the ‘Transaction Status’ callback to make your application aware of failed transactions. You can then handle the reversal in whatever way you choose.
There are two methods for automatic payment reversal, depending on whether the payment was processed through a processing company or a batch file (like Nacha or CPA-005).
Automatic reversals through payment processors
If you're handling payments made through a bank card, ACH, or EFT processor, you'll set up an event for transaction status updates in Secure Payments. When a processor tells you a transaction fails, Secure Payments will relay that message to the URL you specify. If you don't see the Transaction Status update, click the plus icon in the top right to create a new event. For more information about creating Secure Payments events, visit our Secure Payments article.
It's also necessary to turn on automatic payment reversal for the processor. This should be done inside of LoanPro by navigating to Settings > Company > Merchant > Secure Payments.
To change the setting, click the 'Edit' button to the right of the individual processor. In the new window, make sure ‘Auto Reversal’ is set to ‘Yes’ and click 'Save'.
Automatic reversals with batch processing
If you're using a batch file to process payments, the reversal process works a little differently because Secure Payments does not have a direct connection to your bank. Just like how you take batch files out of Secure Payments and send them to your bank, you'll need to get information about payment reversals from your bank and convey it back to Secure Payments.
You can do this with two tools: The Secure Payments API, or a Transaction Update Import.
Updating Transaction Statuses through the API
You can update payment statuses using your own application through the Secure Payments API. Instructions on how to do so are found in our API documentation.
Transaction Update Import
The two batch processing tools in LoanPro, Nacha and CPA-005, both have an Auto Reversal setting. After you submit a batch file to your bank, they'll give you a return file. For each transaction that was returned, the file will give you a return code (or R-Code) explaining what the issue was. LoanPro lets you specify what the effect of each R-Code will be. For more information about configuring your R-Codes, see our article on bulk processing.
To upload a return file and update the transaction status of batched payments in Secure Payments:
- Navigate to the ‘Import’ section of Secure Payments and select the small info button in the top right-hand corner of the page.
- In the import information window, select ‘Transaction Update’ then download the sample file to your computer.
- The sample file is an import template that will contain all of the headers necessary for your import and also some example information as shown below. Row one contains the headers for the import, and row two contains the example information.
- To build the import file, fill in the ID column with all the IDs of the transactions you would like to update. Because this is a return code import to update the R-Code of failed payments, fill in the status column with ‘FAILED’ for each transaction. Fill in the R-Code column with the corresponding R-Code for each failed transaction ID (see bulk processing). The ‘Comments’ section is not required, but may be filled in with comments for each failed transaction. Below is an example of what your file should look like.
- Once you have entered the correct information in the file, save the file to a location you'll be able to access when you perform the import.
- To import the file, select ‘Add’ in the Import section of Secure Payments.
- In this pop-up window, select ‘Transaction Status Update’ as the file type.
- Drag and drop the file in the drop zone or click the drop zone to find the file on your computer.
- Specify who will be notified when the import is validated and completed from the following options using the ‘Notification Email Address’ field.
- Address on account: The notification email will be sent to the email associated with your Secure Payments account.
- Custom: Another field will appear where you may enter a different email address where you would like to receive the notifications.
- Once you're ready to upload, click 'Save'. A notification should pop-up telling you the upload was successful.
After uploading, your file will appear in the list of import uploads in Secure Payments. If there are any errors, the ‘Verified’ column will show 'No' next to your file, and you’ll receive an email notifying you that the import validation failed. This email will contain a file listing all errors in your import. You can also download this error file by selecting the download icon next to your import file in the 'Verify File' column. Once you’ve corrected the errors, re-upload the file. If the file is error free, click the cloud icon to finalize the upload. Your import is now complete.
For information on how to upload a returns file through the API, see our Bulk Processing article.
Reversal fees
You can choose to have LoanPro automatically log a fee for reversed payments. This is done by setting up a recurring fee that is based on the payment reversal event. To set up recurring fee configurations, navigate to Settings > Loan > Charges > Recurring Charges in your LoanPro account.
Make sure the Trigger Type and Trigger Event are set to ‘Event’ and ‘Payment Reversal’ respectively. You can set up the charge as you like, including specifying an R-Code that will trigger the charge.
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