The Prorated Fee divides the fixed amount of the penalty by the number of time units in the contract and then multiplies that amount by the number of time units left in the contract when it was broken. This penalty is used only with the “Term Commitment” Term Type.
For example, a customer has a 12 month term commitment contract with a $200 Prorated Fee penalty. The contract starts on 1/1/2004. He then disconnects on 4/15/2004. This leaves him with 8 ½ months remaining on his term commitment. When the biller assesses the penalty, it will first round the remaining months up to 9, from which it gets a ratio of 9/12 or .75. This customer is then charged .75 * $200 = $150.
Notes:
If the contract is terminated in the middle of a time unit, the remaining partial time units are rounded up for penalty calculation.
The time units must be the same for both the billing cycle that the customer is in, and the contract terms of the contract that is assigned to that customer. For example, if the customers who are to receive the contract belong to a billing cycle that is billed monthly, the contract terms must be monthly. If the customers who are to receive the contract belong to a billing cycle that is billed weekly, the contract terms must be weekly.