What Is an Administrative Charge?

K. Kinsella

An administrative charge is a fee that an organization may assess in exchange for providing certain types of services. Insurance firms, lenders, banks, investment firms and other types of institutions require both consumers and business entities to pay a variety of different administrative charges. Some charges are assessed on an ongoing basis while other charges are one-time fees.

Banks often require account holders to pay an administrative charge for receiving duplicate copies of documents.
Banks often require account holders to pay an administrative charge for receiving duplicate copies of documents.

Many lenders require loan applicants to pay an administrative charge known as an application, processing or origination fee. This fee covers some of the costs associated with processing a loan application such as the credit report fee. Additionally, many loan originators are paid commissions in which case the administrative charge may cover a portion of the originator's wages. Other types of loan related costs such as appraisal fees are not classified as lender administrative charges since those fees cover the costs of third party vendors rather than the lender's own expenses.

Mutual funds and other investment companies charge a wide range of administrative charges ranging from annual account management fees to trade fees. In some instances, investors have to pay a commission known as a load when they buy or sell shares but investors can avoid paying these fees by purchasing so-called no load funds. Nevertheless, no-load funds are not without costs since many no-load investment funds charge an administrative fee rather than a load. Many investors confuse loads with administrative charges but in the investment world, loads are commissions paid to brokers while administrative charges are fees paid to the fund company rather than a sales person.

Financial companies such as banks often require account holders to pay an administrative charge for receiving duplicate copies of past bank statements or canceled checks. Additionally, while some banks offer free accounts many institutions impose monthly administrative charges on account holders. In some instances, banks waive fees for clients who maintain account balances that exceed certain levels. Many banks also charge an administrative fee for clients who wish to conduct wire transfers and other types of time-consuming one-off transactions.

Insurance firms and other financial institutions normally disburse funds to clients free of charge. These distributions normally take the form of checks and it can take several days for a policyholder or bank customer to receive a check in the mail. Consequently, some institutions offer to expedite disbursements to clients who agree to pay an administrative charge. Some banks charge one fee to have funds send via wire transfer and a lesser fee to have checks sent via overnight express rather than through the mail.

Institutions including colleges, recruitment offices and consultancy firms are among the other types of entities that often assess administrative fees. Clients of these firms sometimes pay a charge to register their information with these firms. In other instances, entities assess a charge whenever clients request information. Laws in many locales require service providers of all kinds to make schedules of administrative charges available to clients prior to fees being assessed.

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