US bank regulators flag immigration work status in consumer lending

Three US banking regulators urged lenders to scrutinize credit extended to immigrants who lack authorization to work in the country, tying immigration status to repayment risk across mortgages, auto loans, credit cards and other consumer products. The guidance, issued Monday by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union Administration, does not appear to create new formal requirements for banks, but it signals a sharper supervisory focus on how lenders assess borrower income and stability.

The agencies said in the guidance that people without US work authorization may present “elevated credit risk” because their ability to earn income, keep a job and maintain financial stability may be more uncertain. Regulators reminded banks and credit unions that they must manage credit risk and assess a borrower’s “willingness and capacity to repay” before extending credit.

Comptroller of the Currency Jonathan Gould said in a CNBC interview Monday that banks already have duties to identify and understand their customers. “Banks have an obligation to know their customer. That’s a pre-existing obligation,” Gould said on CNBC’s Squawk on the Street.

How the guidance fits into lending decisions

Consumer lenders typically evaluate whether a borrower can repay by reviewing income, employment, debt obligations, credit history and collateral where relevant. For mortgage lending, that process can include identity checks, credit reports and documentation of income. The new guidance asks regulated institutions to consider whether lack of work authorization affects those repayment assumptions, according to the agencies.

The regulators did not say banks must verify every customer’s immigration status. Attorneys at Troutman Pepper Locke wrote after President Donald Trump’s May executive order on the issue that the order appeared to reinforce a risk-based approach rather than mandate immigration checks for all customers. The lawyers wrote that the order pushed regulators to treat immigration status and work authorization as relevant risk factors while calling for targeted supervisory action.

The May executive order directed regulators to address use of the financial system by unauthorized immigrants. In that order, Trump said financial institutions should examine credit risks linked to mortgages, car loans, credit cards and other consumer credit issued to unauthorized immigrants.

Limited data on loan exposure

The scale of bank lending to unauthorized immigrants is uncertain. Banks are not required to collect citizenship information from customers, leaving limited public data on how many borrowers without legal work authorization have access to loans.

Mortgage access is one area where estimates exist. Most mortgages require a Social Security number so lenders can verify identity and obtain credit histories, according to the Urban Institute. Some borrowers can obtain mortgages using an Individual Tax Identification Number, or ITIN, and the Urban Institute has said most ITIN holders are unauthorized immigrants.

The Urban Institute estimated that 5,000 to 6,000 ITIN mortgages were originated in 2023. The National Community Reinvestment Coalition said there were about 4.6 million total mortgage originations that year, placing ITIN mortgage volume at a small share of the broader market.

Critics have argued that federal guidance of this kind could discourage some immigrants from using banks, including people who do have work authorization, and could raise compliance costs for financial institutions. They have also warned that reduced access to regulated banking could push more money into informal channels, where fraud and abuse risks may be higher.

This story draws on original reporting from CNBC.