“The CFPB will not allow companies to use immigration status as an excuse for illegal discrimination.”
In a joint Department of Justice (DOJ) and Consumer Financial Protection Bureau joint statement released Thursday, they have opened a huge mess for the lending world to wrestle with. In this memo, they state that “denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.” Considering the swarms of people crossing our borders seeking asylum over the past two years, this presents the lending world some questions.
While perceived immigration status is understandable, does this include it is now a violation of the law to deny loans to a known illegal alien? Does a mere application for asylum make their residency legal? If you are a lender with a first-time buyer program for persons with no credit, this may have some major implications.
For instance, can you require applicants with no credit files or unidentifiable social security numbers to provide a social security card to prove its validity? Are lenders now required to accept foreign ID’s?
Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division stated; “This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.”
Which immigrant status is it acceptable to decline a loan for? Asylum status, no legal status? In the absence of clarity, this comes across as a little fuzzy and some are perceiving it as a threat.
It’s not political, it’s a matter of conflicting issues of compliance and risk. Compliance in that this new guidance contradicts a great many declined loans and risk in the issue associated with making loans to persons whose residency status may be revoked leaving the lenders at a loss.
Just my two cents. Read Below and decide for yourself.
Borrowers report being denied loans because of their immigration status
OCT 12, 2023 – WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) and Justice Department today issued a joint statement that reminds financial institutions that all credit applicants are protected from discrimination on the basis of their national origin, race, and other characteristics covered by the Equal Credit Opportunity Act, regardless of their immigration status. The CFPB and Justice Department are issuing this statement because consumers have reported being rejected for credit cards as well as for auto, student, personal, and equipment loans because of their immigration status, even when they have strong credit histories and ties to the United States and are otherwise qualified to receive the loans.
While the Equal Credit Opportunity Act allows a creditor to consider an applicant’s immigration status when necessary to ascertain the creditor’s rights regarding repayment, creditors should be aware that unnecessary or overbroad reliance on immigration status, including when that reliance is based on bias, may run afoul of the law.
“Fair access to credit is crucially important for building wealth and strengthening household financial stability,” said CFPB Director Rohit Chopra. “The CFPB will not allow companies to use immigration status as an excuse for illegal discrimination.”
“Lenders should not deny people the opportunity to take out a loan to buy a home, build their businesses or otherwise pursue their financial goals because of unlawful bias and without regard to their actual ability to repay,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.”
Some financial institutions have maintained blanket policies denying credit to individuals based on their immigration status, regardless of their personal circumstances and demonstrated ability to repay, arguing that the Equal Credit Opportunity Act, and the regulation that implements it, protect them whenever they consider immigration status in making a credit decision. Others have incorrectly claimed that the Act shields lenders from liability under other federal and state civil rights laws that bar discrimination on the basis of someone’s status as an immigrant or noncitizen.
The joint statement explains that while the Equal Credit Opportunity Act allows creditors to consider immigration status when necessary to ascertain the creditor’s rights regarding repayment, unnecessary or overbroad reliance on immigration status may violate the Act’s prohibition of discrimination on the basis of national origin, race or another prohibited basis. The joint statement also confirms that neither the Equal Credit Opportunity Act nor its regulations provide companies a safe harbor with respect to other laws barring discrimination on the basis of immigration status.
Source: CFPB
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