New Federal Guidance Says Immigration Status Can Increase Credit Risk For Lenders
By CU Today Staff —
WASHINGTON— Federal banking regulators and NCUA have jointly warned financial institutions that lending to borrowers who are not legally authorized to work in the United States presents heightened credit risk, urging banks and credit unions to strengthen underwriting and risk management practices.
As the new guidance discusses, lending to individuals who are not legally authorized to work in the United States may present elevated credit risk because a borrower’s ability to generate income, maintain employment, and remain financially stable may be subject to greater uncertainty. Among other things, the guidance advises financial institutions to identify, measure, monitor, and control these risks through safe and sound underwriting practices that assess a borrower’s willingness and capacity to repay according to the terms of the credit obligation, the agencies stated.
"Today’s guidance also advises financial institutions to carefully consider the June 8, 2026 “Statement on Ability To Repay and Immigration Status,” issued by the Consumer Financial Protection Bureau, reminding creditors of their obligations under the Truth in Lending Act as implemented by Regulation Z, and the Equal Credit Opportunity Act, as implemented by Regulation B, as they relate to non-work authorized borrowers," the agencies said.
POLITICO noted the guidance implements portions of President Trump's May executive order directing Treasury and federal financial regulators to strengthen customer due diligence and address the risks associated with lending to individuals who are not legally authorized to work in the United States. While federal law does not prohibit banks or credit unions from serving undocumented immigrants, the Administration has sought to increase regulatory scrutiny of such lending. The CFPB issued similar guidance last month regarding ability-to-repay standards, while banking groups have raised concerns about the additional compliance burden the new requirements could impose.
Originally reported by CU Today.