US Axes Biden-Era Guidance on Credit Borrower Immigration Status

Banks and other lenders can consider a potential borrower’s immigration status when reviewing a loan application, the Consumer Financial Protection Bureau and the Justice Department said, reversing a Biden-era policy.

The agencies on Monday withdrew a 2023 joint statement that warned lenders against considering immigration or citizenship status too broadly in mortgage, credit card, auto loan, and other credit applications.

The Biden administration had determined such reviews risked violating federal fair lending laws, but the Trump-led agencies now say the joint statement was inappropriate.

Lenders are allowed to use immigration and residency status in loan application evaluations under the 1974 Equal Credit Opportunity Act, the Justice Department and the CFPB said in their withdrawal.

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

The CFPB is separately looking to roll back fair lending enforcement, including rewriting the ECOA’s rules to make it harder for regulators and private actors to bring discrimination cases.

The latest withdrawal also comes as the Trump administration continues its immigration crackdown, including flooding Minnesota with federal immigration agents in recent weeks, leading to the killing of a US citizen who was monitoring Immigration and Customs Enforcement activities.

‘Restoring Alignment’

The Biden-era joint statement said there were some valid uses for citizenship and residency information in credit application evaluations, but that an overreliance on such considerations could violate fair lending laws.

“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.

The Trump administration now says the 2023 joint statement led to confusion among lenders and had no regulatory or statutory basis.

“This administration is restoring alignment with established federal civil rights law rather than continuing the prior administration’s ideologically-driven departures,” Harmeet K. Dhillon, assistant attorney general for the DOJs Civil Rights Division, said in a statement.

But banks and other lenders should still be wary of moving too far away from the Biden-era position on considering immigration status in loan decisions, said Cathy Brennan, a Hudson Cook LLP partner whose practice focuses on regulatory compliance for financial technology and other financial firms.

“It is unfortunate that this administration prioritizes demonizing immigrants to the exclusion of everything else,” she said. “Reputable lenders are well-aware of their obligations under the ECOA to provide credit to all without discriminating on the basis of color or national origin.”