CFPB and DOJ Say Creditors Can Consider Borrowers’ Citizenship Status

The Consumer Financial Protection Bureau and the Department of Justice withdrew a 2023 joint statement that warned lenders not to look at an applicant’s immigration status when considering extending credit.

The agencies said in a Monday (Jan. 12) press release that the Equal Credit Opportunity Act (ECOA) and Regulation B permit creditors to consider a borrower’s immigration or citizenship status along with other pertinent elements of creditworthiness and information to protect the creditor’s rights and remedies regarding repayment.

The joint statement that was withdrawn Monday had cautioned lenders that policies related to the borrower’s status could violate provisions of ECOA and Regulation B that prohibit discrimination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

PYMNTS reported in November that ECOA is the federal law that prohibits discrimination in credit transactions, while Regulation B is the operational rulebook that shapes how lenders process applications, request information, determine credit outcomes and communicate adverse actions.

While Regulation B is often associated with consumer lending and credit cards, it applies equally to small business lending, merchant financing, marketplace credit arrangements and certain buy now, pay later (BNPL) structures that qualify as credit, the report said.

CFPB Acting Director Russell Vought said in the Monday press release 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.

Harmeet K. Dhillon, assistant attorney general at the DOJ’s Civil Rights Division, said in the release that the federal government aims to avoid statements that “could confuse the law or imply compliance standards for civil rights laws that lack any statutory or regulatory basis.”

“This administration is restoring alignment with established federal civil rights law rather than continuing the prior administration’s ideologically-driven departures,” Dhillon said in the release.

In an Oct. 12, 2023, press release announcing the now-withdrawn joint statement, the CFPB said that the statement would “assist creditors and borrowers in understanding the potential civil rights implications of a creditor’s consideration of an individual’s immigration status under the Equal Credit Opportunity Act (ECOA).”