MLA and SCRA verification and monitoring

Monitor accounts for service in the armed forces through Smart Verify.

Two laws, the Military Lending Act (MLA) and Servicemembers Civil Relief Act (SCRA), shield members of the armed forces from interest rates beyond certain thresholds, with the intention of allowing them to focus on their service.

MLA applies to active duty servicemembers (including those on active Guard or active Reserve duty), spouses, and certain dependents. If an account is subject to MLA, the interest rate is limited to 36%.
SCRA also applies to active duty servicemembers, reducing the rate of pre-service accounts to 6% and protecting them against foreclosures and collateral repossessions.

Failing to comply with these requirements could result in significant fines for credit providers, but manually requesting documentation from servicemembers is time-consuming and prone to errors.

That’s why LoanPro provides verification and monitoring for MLA and SCRA. LoanPro can check individual borrowers against the Defense of Department’s Military Database, either through ongoing or an ad hoc verification.

Before using these tools LoanPro clients will need to have the process configured in LMS. Reach out to your normal LoanPro contact, and they’ll get you started.

The processes can be customized to suit your needs and business logic, using LoanPro tools like Agent Walkthroughs, Quick Actions, or the Automation Engine to streamline or fully automate the check.

Verification process

The details will vary depending on your configuration preferences, but in any case, the process will go something like this:

An agent or automation triggers a check. When an agent gets word that a borrower has gone active duty, they can request a verification through LoanPro’s streamlined UI tools, like Agent Walkthroughs and Quick Actions. You can also set up ongoing monitoring for service members who could potentially switch to active duty service.
LoanPro checks the borrower against the Military Database. Regardless of what triggered the verification, LoanPro will run a search in the Defense Department’s database using the borrower's first name, last name, and Social Security Number. The results of that search (either a positive match or no) are automatically sent back to LMS.
The borrower is updated in LoanPro.
1. If they’re confirmed in the database, LoanPro will receive a notification including start and estimated end date of their active duty period, as well as their military branch and a verification certificate from the DOD. With that information, LoanPro will write a note on the borrower. For SCRA,it reads verified: {Customer_Name}, is SCRA certified through the "Military Branch”. Their active duty service dates are estimated to begin on "active_duty_start_date" and end on "active_duty_end_date". Additionally, The SCRA certification form has been uploaded to the documents section. For MLA, it reads: Verified: Your borrower, {Customer_Name}, is MLA certified. We have uploaded the MLA certification PDF to their profile. LoanPro then uploads the SCRA or MLA certificate to the customer documents section. They also updates the appropriate fields: MLA Certified, SCRA Certified, Active Duty Start Date and Military Branch.
2. If they do not exist in the DOD Database, LoanPro will write a note that states: ”We are unable to confirm if [Customer Name] is SCRA certified.” or ”We are unable to confirm [Customer Name] is MLA certified”.
LoanPro performs any other automations connected to the check. LoanPro can then perform other automations to keep the account compliant, like adjusting the interest rate or marking that the collateral should not be repossessed.

MLA Verify

SCRA Verify

By leveraging LoanPro's MLA and SCRA verification tools, you can ensure accurate portfolio management and compliance all while maintaining operational efficiency.

Line of Credit SCRA requests

LoanPro provides a powerful interest rate adjustment to borrowers that qualify under the SCRA. This feature calculates eligible balances at a reduced interest rate during the SCRA window and applies rate changes retroactively, then restores original rates when the SCRA window concludes. These calculations are all handled by the system automatically, making it easy to make complex interest adjustments to a line of credit account.

Creating an SCRA request

You can create an SCRA request by navigating to Tools > SCRA > New SCRA Request inside of the eligible Line of Credit account.

Below is a list of each of the request's fields:

Setting	Description
Service Start Date	The service start date in MM/DD/YYYY format. This is when the borrower's SCRA window begins.
Service End Date	The service end date in MM/DD/YYYY format. This is when the borrower's SCRA window ends.
New Interest Rate	The new interest rate to apply to the SCRA window. This is typically set at 6%.
Status	The SCRA request status. This status changes how the adjustment is applied to the account. The following options are available: Hold Rate Reduction. This status will hold on applying the SCRA rate adjustment. Use this status when you are waiting on additional documentation from the borrower. Pending Rate Reduction. This status will notify the system of the pending SCRA request. Use this status when you are ready for the system to begin rate reduction and restoration processes. Skipped Processing. This status will be skipped and will not be processed on the account. Use this status for record-keeping or auditing purposes.
Service Document	The uploaded document providing evidence of service.

The SCRA request will be added to the SCRA request table when complete.

About an SCRA request

Clicking on an SCRA request in the table will open the General Info tab providing detailed information about the SCRA—including created date, service start date, service end date, new interest rate, request status, service documents, author, and author's IP address.

You can also edit the request, download or view the supporting document, and delete the request.

How an SCRA request works

When an SCRA request is created with the Pending Rate Reduction status, the system begins tracking and processing the request using the provided start and end dates. Depending on these dates, a few different things will happen.

Start date

The system will perform different actions depending on whether the start date is in a current, previous, or future billing cycle.

Start Date in a past billing cycle:
LoanPro runs an internal process to simulate behavior as if the request had been active at the time of the billing cycle.

Adjusting transactions are created using negative finance charges, which are then used to reduce previously accrued interest by applying credits to the interest charges balance.
Posts those adjustments in the current billing cycle to retroactively account for overcharged interest.
Updates the SCRA request status to either:
- Rates Reduced if all adjustments succeeded.
- Rates Reduction Failed if any step in the process failed.

To support accurate, ongoing calculations:

LoanPro stores a Past Period Effective Date on the request, indicating the historical start date of the SCRA request's influence.
A Past Period SCRA Array is generated to capture the timeline of applicable balances from past periods. This data is used to inform the calculator of context for the interest rate and all affected balances. These mechanisms ensure that once the past corrections are posted, the calculator continues to apply the reduced rate to the remaining eligible balance, until the end of the SCRA window.

Start Date in the current billing cycle:
LoanPro's calculator applies the new interest rate to the SCRA balance.

This change is reflected immediately and the SCRA balance can be viewed in the Daily Archive > Balance Breakdown > Bucket ID > SCRA
This request remains in Pending Rates Reduction status until the billing cycle closes, then the status will updated to Rates Reduced.

Start date in a future billing cycle:
No action is taken until the start date enters the current billing cycle. Once it does, the calculator performs the processes described above.

End date

When the end date of the SCRA window is reached, LoanPro begins the rate restoration process. This will adjust all balances calculated at the reduced SCRA rate are returned to their original interest rate.

End date in a past billing cycle:
LoanPro runs internal processes to simulate behavior as if the request had been active at the time of the billing cycle. A final set of adjusting transactions are generated to restore the balance back to the original interest rate.

When completed, the SCRA request status will be updated to:

Rates Restored if all adjustments succeeded.
Rates Restoration Failed if an step in the process failed.

End date in the current or future billing cycle:
A transaction is sent to the calculator when the end date is reached. The calculator will then move the SCRA balance and returns it to the main bucket balance at the original interest rate.

When the billing cycle closes after the end date, the SCRA request status will be updated to Rates Restored.

Editing an SCRA request

An SCRA request can be edited at different stages of its lifecycle. However, keep in mind that some fields will become locked based on its current status and system processing rules.

Here is a list of what you can and cannot edit depending on the request status:

Field	Editable when:
Start Date	Editable when the request is in Hold, Skipped, or Pending status and the start date is not in a past billing cycle.
End Date	Editable until it falls into a closed billing cycle.
Interest Rate	Editable while the Start Date falls into an open billing cycle.
Document ID	Always editable.
Status	Editable any time before final processing completes and the status is updated to `Rates Restored`. This allows manual transitions between Hold and Pending. Skipped does not support manual transitions.

Note the following when editing an SCRA request:

When a request enters Rates Reduced, the Start Date and Interest Rate become locked.
When a request reaches Rates Restored, all fields are locked except documentID.

Retrying an SCRA request

To retry an SCRA request with a Rates Reduction Failed or Rates Restoration Failed status, you can use the retry action available through the UI

Deleting an SCRA request

SCRA requests can be deleted when specific conditions are met. This feature preserves system integrity and maintains auditability. The delete button will be available during the following scenarios:

Status	Additional Conditions
Hold Rate Reduction	N/A
Skipped Processing	N/A
Rates Reduction Failed	N/A
Pending Rate Reduction	When the Start Date is in a current or future billing cycle.

If any other conditions are met, then the SCRA cannot be deleted.

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