In a joint statement released October 12, the US Department of Justice (DOJ) and Consumer Financial Protection Bureau (CFPB) cautioned lenders about considering immigration status in credit decisions. Although the CFPB's Regulation B (which implements the Equal Credit Opportunity Act—or ECOA) expressly permits creditors to consider immigration status in certain circumstances, the joint statement advises lenders that, "Regulation B does not, however, provide a safe harbor for all consideration of immigration status."
Immigration status is not a prohibited basis under ECOA or Regulation B. In fact, Regulation B explicitly states that a creditor may consider a credit applicant's immigration status or status as a permanent resident and "any additional information that may be necessary to ascertain the creditor's rights and remedies regarding repayment." However, immigration status may broadly overlap with or, in certain circumstances, be viewed as a proxy for a prohibited basis (e.g., national origin, race). In the joint statement, the agencies contend that if a creditor's consideration of immigration status is not necessary to ascertain the creditor's rights and remedies regarding repayment and results in discrimination on a prohibited basis, it may violate ECOA and Regulation B. The joint statement advises creditors to evaluate whether their reliance on immigration status and citizenship status is necessary or unnecessary to ascertain their rights or remedies for repayment. According to the joint statement, "To the extent that a creditor is relying on immigration status for a reason other than determining its rights or remedies for repayment, and the creditor cannot show that such reliance is necessary to meet other binding legal obligations . . . the creditor may risk engaging in unlawful discrimination, including on the basis of race or national origin, in violation of ECOA and Regulation B."
The agencies provide the following illustrative example:
For example, if a creditor has a blanket policy of refusing to consider applications from certain groups of noncitizens regardless of the credit qualifications of individual borrowers within that group, that policy may risk violating ECOA and Regulation B. This risk could arise because some individuals within those groups may have sufficient credit scores or other individual circumstances that may resolve concerns about the creditor's rights and remedies regarding repayment.
The joint statement also warns lenders about the use of "overbroad" policies related to the consideration of certain criteria that also may correlate with immigration status—such as how long a consumer has had a Social Security Number—and indicates any claims that policies are necessary to preserve the creditor's rights and remedies regarding repayment or to meet other binding legal obligations should be supported by evidence and should not be a pretext for discrimination.
Although the joint statement is for informational purposes only, does not impose any legal requirements and it is not enforceable, it reflects the agencies' views on this issue. In addition to raising ECOA concerns, the joint statement indicates that creditors' consideration of immigration status may also raise concerns under 42 U.S.C. § 1981. (Although not referenced by the joint statement, certain state laws, such as California's Unruh Act, include immigration status as a prohibited basis under the law.)
The DOJ and CFPB's position articulated in the joint statement arguably is a narrower interpretation of creditors' ability to consider immigration status than is expressed in the CFPB's other interpretive guidance on this issue. Notably, the joint statement does not reference other relevant provisions of the CFPB's Official Interpretation to Regulation B that describe creditors' permissible consideration of immigration status in making credit decisions. For example, the CFPB's Official Commentary to Regulation B explicitly states that, "A denial of credit on the ground that an applicant is not a United States citizen is not per se discrimination based on national origin." The Commentary also explains that an applicant's immigration status and ties to the community (such as employment and continued residence in the area) could have a bearing on a creditor's ability to obtain repayment. Accordingly, the Commentary provides that a creditor "may consider immigration status and differentiate, for example, between a noncitizen who is a long-time resident with permanent resident status and a noncitizen who is temporarily in this country on a student visa."
Because many creditors currently ask about and consider applicants' immigration status as part of the credit application process, the joint statement is likely to create some controversy in the industry. Also, the CFPB likely will be reviewing how supervised institutions use immigration status in credit decisioning during examinations.
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