Introduction to Interest Rate Change Notice

As per the Australian legislation, when a minimum payment installment amount increases, the bank is required to notify the customer. This written notification must be provided no later than a specific number of days before a change in the payment amount takes effect. This requirement only applies to retail lending products where minimum repayment amounts increase and not decrease.

For personal lending products, bank is required to inform the increase of installment amount before the new amount is taking effect.

Whenever Primary Lending Rate (PLR) is changed and communicated by the central bank, the bank creates a record with actual effective date. Say if interest has to be effective from 1st September, then the bank creates a future dated record for 1st September, so that new rate is effective on 1st September.

However, the customer will get enough time, the recalculation of payment is deferred by X days (by regulation 23 days which includes 3 days for postage).

The advice to communicate the new payment amount, which is going to change in X days that has to be generated as of the interest change date but only when there is an increase in the payment amount.

The Temenos Transact AA module can be configured to recalculate the payment amount or term whenever interest rate is changed. However, the requirement to defer recalculation of payment amount by X no of days cannot be achieved through model bank configuration.

This document explains in detail the functionality of interest rate change notice from a bank user’s perspective.

The bank requires changes to the Temenos Transact model bank lending functionality to support Australian banking standards and specific operations.

Click here to understand the terms and abbreviations used in this functionality.