U.S. bank regulators urge lenders to scrutinize credit for unauthorized immigrants

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Bank regulators credit scrutiny

Highlights

U.S. bank regulators advised lenders that unauthorized immigrants may pose elevated credit risk due to income and job uncertainty, potentially affecting loan decisions.
Federal guidance may reduce credit availability for some unauthorized immigrants and could raise compliance costs for banks by increasing scrutiny of work authorization.
The Urban Institute estimates 5,000–6,000 mortgages using Individual Tax Identification Numbers in 2023, versus 4.6 million total originations, highlighting limited loan access for undocumented immigrants.

Guidance ties lending risk to work authorization

As reported by CNBC, citing the Office of the Comptroller of the Currency, alongside the Federal Deposit Insurance Corporation and the National Credit Union Administration, the guidance says immigrants who are not authorized to work in the U.S. may present elevated credit risk because their ability to generate income, maintain employment and remain financially stable can be more uncertain.

The agencies say banks should continue to assess a borrower's willingness and capacity to repay debt when making decisions on mortgages, auto loans, credit cards and other forms of consumer lending. Experts cited in the report say the step could reduce credit availability for some unauthorized immigrants, even though the guidance appears to stop short of imposing new formal rules on lenders.

Banking access and compliance concerns

Critics say the federal guidance could chill use of the banking system more broadly, including among some immigrants with work authorization, while also raising compliance costs for banks. They warn that pushing more financial activity outside regulated institutions could increase risks of fraud and abuse.

Data on loan access for undocumented immigrants remains limited because banks are not required to collect citizenship information from customers. The Urban Institute estimates that 5,000 to 6,000 mortgages using Individual Tax Identification Numbers were made in 2023, compared with about 4.6 million total mortgage originations that year, according to the National Community Reinvestment Coalition.

The guidance follows an executive order signed by President Donald Trump in May directing regulators to crack down on unauthorized immigrants' use of the financial system. Attorneys at Troutman Pepper Locke say the order treats immigration status and work authorization as relevant risk factors, but appears not to require financial institutions to verify every customer's immigration status.

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