MLA/SCRA
The Military Lending Act (MLA) and the Servicemembers Civil Relief Act (SCRA) provide critical financial protections for active-duty military personnel and their families. Canopy's comprehensive SCRA/MLA support ensures lenders can comply with federal regulations while providing seamless service to military customers.
SCRA primarily focuses on interest rate relief, capping rates at 6% for eligible service members on debts incurred before military service. MLA provides broader protections including interest rate caps, fee restrictions, and enhanced disclosure requirements for certain credit products extended to covered borrowers.
Canopy's implementation handles the complex operational requirements of these protections, including retroactive adjustments, mid-cycle rate changes, proper accounting treatment, and comprehensive audit trails—all while maintaining the performance and reliability needed for high-volume lending operations.
Use Cases
Interest Rate Relief for Deployed Service Members
When an active-duty service member provides military orders showing deployment or activation, lenders can immediately apply SCRA protections using Canopy's dedicated endpoint. The system automatically calculates retroactive interest adjustments back to the military service start date, applies the 6% rate cap, and generates appropriate accounting entries. This ensures compliance while minimizing operational burden on servicing teams.
Sponsor Bank Compliance Programs
Sponsor banks working with fintech partners need robust systems to demonstrate SCRA/MLA compliance to regulators. Canopy's implementation provides comprehensive audit trails, automated compliance reporting, and systematic application of military protections that satisfy examination requirements. The platform's built-in documentation and reporting capabilities help banks demonstrate their commitment to serving military customers appropriately.
Portfolio Risk Management
Military protections can significantly impact portfolio economics, particularly for lenders with high concentrations of military borrowers near bases or deployment centers. Canopy's SCRA/MLA tracking enables lenders to monitor the financial impact of military adjustments, forecast potential rate reductions, and incorporate these protections into their risk models and pricing strategies.
Implementation Steps
1. Military Status Identification
Establish processes to identify military customers and capture relevant service information. This includes integrating with military verification services, training customer service teams on military benefit inquiries, and establishing workflows for processing military documentation such as deployment orders or active-duty verification.
2. API Integration Setup
Implement the MLA/SCRA adjustment endpoint in your loan servicing workflows.
For lines of credit, use these endpoints:
For installment loans, use these endpoints:
Configure your systems to handle the required parameters including military service start dates, end dates, and effective timing for adjustments. Ensure proper error handling for edge cases such as overlapping service periods or invalid date ranges.
3. Retroactive Processing Configuration
Configure your systems to handle retroactive interest adjustments properly. This includes understanding how Canopy applies debit offsets for historical interest corrections, managing the timing of adjustments relative to billing cycles, and ensuring accurate customer communication about the changes to their accounts.
4. Reporting and Compliance Integration
Integrate military protection data into your compliance reporting systems. This includes tracking the number of military customers receiving protections, the financial impact of rate adjustments, and maintaining audit trails that demonstrate proper application of military benefits for regulatory examination purposes.
Frequently Asked Questions
What loans qualify for MLA/SCRA protection?
The specific loan types and eligibility criteria vary between the acts, but Canopy's system can handle both with appropriate configuration.
Can SCRA protections be automatically reversed?
SCRA protections typically remain in effect until the end of military service. When service ends, lenders must manually update the interest rate using Canopy's rate modification endpoints. The system doesn't automatically revert to original rates, ensuring no accidental removal of protections.
How does this support sponsor bank examination requirements?
Canopy's SCRA/MLA implementation provides comprehensive audit trails, systematic application of protections, and detailed reporting capabilities that demonstrate compliance with federal regulations. The platform's documentation supports banks during regulatory examinations by showing proper identification, application, and ongoing management of military protections.
How are these protections reflected in customer communications?
Military adjustments appear in standard account statements and communications, with clear identification of the protection type and effective dates. This transparency helps military customers understand their benefits while providing documentation for their records.
What reporting capabilities are available for military protections?
Canopy provides comprehensive reporting on military protections including customer counts, financial impact analysis, adjustment history, and compliance metrics. These reports support both operational management and regulatory compliance requirements.
How does this integrate with existing compliance programs?
SCRA/MLA support integrates seamlessly with existing compliance frameworks, providing additional data points for fair lending analysis, customer protection monitoring, and regulatory reporting. The system's audit trails and documentation support broader compliance initiatives while specifically addressing military protection requirements.
Updated 3 days ago