CFPB Advises Lenders to Consider Applicants’ Immigration Status

The Consumer Financial Protection Bureau (CFPB) released a statement Friday (June 5) reminding creditors that when they assess consumers’ ability to repay mortgages and certain open-end credit products, they must consider their immigration status.

This consideration is part of creditors’ requirements under the Truth in Lending Act and its implementing Regulation Z, the statement said.

“This statement emphasizes to creditors that these requirements may obligate consideration of a consumer’s immigration status, especially where removal from the United States may disrupt the consumer’s income,” CFPB said in the statement.

The statement was posted on the Federal Register’s public inspection issue on Friday and is scheduled to be published in the Federal Register on Monday (June 8).

Russ Vought, director of the Office of Management and Budget (OMB) and acting director of the CFPB, previewed the statement in a Thursday (June 4) post on X that included a link to a Fox Business report about the then soon-to-be-released statement.

“An individual’s illegal immigration status must be factored into their ‘ability to repay’ under the Truth in Lending Act,” Vought said in the post.

In the statement, the CFPB said creditors may learn that an applicant may not be lawfully present in the country, and therefore at risk of removal, through direct inquiry, the applicant’s use of identification methods that are typically issued to people without proof of legal residency, or other sources. This information could indicate that the applicant may be unable to earn income if they are removed from the United States, the agency said.

“The Bureau expects compliance with law and failure to account for such a reasonably expected change in income may not comply with a creditor’s obligation to reasonably assess a borrower’s ability to repay the loan or line of credit sought,” the CFPB said.

In January, the CFPB and the Department of Justice withdrew a 2023 joint statement that warned lenders not to look at an applicant’s immigration status when extending credit.

The joint statement that was withdrawn had cautioned lenders that policies related to the borrower’s status could violate provisions of the Equal Credit Opportunity Act (ECOA) and Regulation B that prohibit discrimination based on race, national origin and other protected classes.

In a January press release announcing the withdrawal of the joint statement, Vought said that ECOA regulations have, for decades, permitted lenders to consider borrowers’ residence status and other information.

“We are correcting the last administration’s attempt to ignore these well-accepted and common-sense principles of our nation’s fair lending laws,” Vought said in the release.