Federal regulators on Monday directed banks and credit unions to more closely scrutinize the loans they make to immigrants who are in the country illegally, as part of the Trump administration’s broader immigration crackdown. The guidance was issued jointly by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union Administration.
What changed
In new guidance, regulators said that undocumented immigrants may present an “elevated credit risk” and warned banks to account for the risk that they may lose their job or be deported as they underwrite new loans. Financial institutions, the guidance says, should take into account that a customer’s status as an unauthorized immigrant may pose a risk to their ability to repay credit cards, mortgages, auto loans or other loans.
The guidance also says that financial institutions “might consider” requiring customers to provide “evidence of continuing work authorization,” among other documentation, as part of their assessment of a customer’s ability to repay a loan.
It implements President Donald Trump’s May executive order aimed at cutting off undocumented immigrants’ access to the U.S. financial system. That executive order instructed the Treasury Department and financial regulators to develop tougher due diligence rules governing how banks verify the identity of their customers and lend to undocumented immigrants.
Why it matters
This guidance fundamentally reshapes how your clients who are undocumented or have uncertain work authorization will be evaluated for credit products. If a client’s ability to repay a mortgage, auto loan, or other credit depends on income from employment, lenders now have regulatory permission to factor in deportation risk or job loss due to work authorization status.
The likely result is tighter credit for illegal immigrants. Banks could demand larger down payments and charge higher rates—or completely reject loan applications—when repayment depends on income from unauthorized work.
Practitioners should also note potential fair-lending exposure. To the extent banks or other financial institutions do rely on immigration status, or perceived immigration status, in making lending decisions, those lenders risk violating the Equal Credit Opportunity Act’s prohibitions on discrimination on the basis of national origin.
Way forward
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Advise clients early. If your client is undocumented and contemplating a loan application, discuss the changed lending landscape now. Traditional financing may no longer be available or may require significantly higher costs.
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Document income conservatively. When work authorization or immigration status is uncertain, help clients build the strongest possible case for creditworthiness using sources not dependent on continued employment (asset-based income, co-borrowers with clear status, etc.).
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Monitor bank guidance. The banking industry has expressed concerns about the burden associated with vetting customers for immigration status. Your bank clients may issue their own policies; stay current on how individual lenders implement the federal guidance.
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Consult fair lending counsel. If a client is denied credit in a pattern that correlates with national-origin proxies (language, accent, neighborhood, industry concentration), explore fair-lending defenses with a financial services attorney.
Disclaimer
This article is not legal advice. Fola Editorial is a software and information service, not a law firm. Immigration law and financial regulation are complex and often overlap. Verify this guidance against the official regulatory materials and consult a licensed immigration attorney about your specific circumstances. Regulatory policy can change without notice, and this article reflects the state of the law as of its publication date only.