CFPB Plans to Scrap Biden-Era Policy on Noncitizen Fair Lending

The Trump administration is moving to withdraw Biden-era guidance from the Consumer Financial Protection Bureau and the Justice Department warning financial institutions that relying on immigration status to make credit decisions can violate fair lending laws.

The CFPB’s notice, submitted Thursday to the White House’s Office of Information and Regulatory Affairs, combines two Trump priorities: cracking down on immigration and rolling back laws intended to curb lending bias.

The agencies’ 2023 joint statement outlined the Biden administration’s view of how a borrower’s immigration status can be used in lending decisions under the Equal Credit Opportunity Act.

While there are some valid uses for immigration status in determining whether to issue a mortgage, credit card, or auto loan, the joint statement warned against using immigration status too broadly.

“Creditors should be aware that unnecessary or overbroad reliance on immigration status in the credit decisioning process, including when that reliance is based on bias, may run afoul of ECOA’s antidiscrimination provisions and could also violate other laws,” the joint statement said.

Most federal agencies submit significant regulatory proposals to OIRA, part of the Office of Management and Budget, for White House review, and President Donald Trump has issued orders to ensure independent agencies such as the CFPB go through the process. OMB Director Russell Vought is also the CFPB’s acting chief.

The CFPB and DOJ didn’t immediately respond to requests for comment.

Trump’s CFPB is separately moving to weaken fair lending enforcement by eliminating statistical reviews of lending outcomes to root out unintentional discrimination.

The Office of the Comptroller of the Currency previously told its examiners to avoid using the theory, known as disparate impact, in fair lending reviews, and it has since suspended fair lending exams until the end of January.

Blanket Policies

The joint statement from the Biden-era CFPB and DOJ gave examples of when lenders can consider citizenship status in evaluating loan applications and when an overbroad consideration risked violating the ECOA and other laws.

A blanket policy of rejecting applications from certain groups of noncitizens, regardless of an individual borrower’s ability to repay a loan, would likely risk running afoul of fair lending laws because it could serve as a proxy for discrimination based on race or ethnicity, the statement said.

Considering information such as how long a person has had a Social Security number or other relevant legal documents could also be a fair lending violation, the agencies said.

Citizenship status could be used to determine a creditor’s repayment rights or whether extending a loan to an individual would violate federal laws restricting dealings with nationals of specific countries, the joint statement said.

The Biden-era statement drew pushback at the time from the American Bankers Association, which said the agencies made “sweeping statements about consideration of immigration status that only raise questions and confusion.”