Federal regulators told banks and credit unions Monday to weigh whether borrowers without legal work authorization could lose income through job termination, expired work authorization or removal from the United States when evaluating mortgages, auto loans, credit cards and other debts. The Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation and National Credit Union Administration issued the joint guidance.
The agencies said borrowers without legal work authorization may present elevated credit risk because their ability to generate income, maintain employment and remain financially stable can carry greater uncertainty. The guidance applies to the banks and credit unions supervised by the three agencies.
The action does not ban financial institutions from lending to illegal aliens or require automatic denials. Instead, it reminds lenders of existing underwriting duties and tells them to assess each borrower’s willingness and capacity to repay.
Deportation and job loss enter the analysis
When a borrower relies on income from employment that is not legally authorized, lenders should consider whether that income could end because of job termination, the expiration of work authorization, an inability to become lawfully reemployed or removal from the United States, according to the guidance.
Financial institutions may review pay stubs, W-2 forms, tax returns, employer verifications, bank statements and evidence of continuing work authorization. They may also test whether a borrower could continue making payments if employment or income suddenly stops.
The agencies also warned that lenders could face greater difficulty locating borrowers or repossessing vehicles, recreational vehicles, boats and other movable collateral. Banks with substantial exposure to employers, industries or regions affected by immigration enforcement may face several borrowers deteriorating at the same time.
Trump order targeted structural credit risk
The agencies acted under Executive Order 14406, which President Donald Trump signed May 19. The order directed federal regulators to address financial risks tied to the inadmissible and removable alien population and specifically identified mortgages, auto loans, credit cards and other consumer credit.
The order said lending to aliens without legal work authorization or those facing a substantial risk of lost wages creates a structural “ability to repay” deficiency that can undermine the safety and soundness of the banking system.
Trump also directed the Treasury Department and financial regulators to strengthen scrutiny of payroll tax evasion, identity-document misuse, shell companies, off-the-books wages and the use of Individual Taxpayer Identification Numbers when applicants lack verified lawful status.
Guidance follows payroll fraud crackdown
As previously reported by The Dallas Express, the Financial Crimes Enforcement Network issued a June advisory urging financial institutions to identify and report suspicious activity tied to the unlawful employment of illegal aliens. FinCEN said reports filed in 2025 identified more than $2.5 billion in suspicious activity linked to payroll tax fraud schemes.
That advisory focused on financial crime and unlawful payroll activity. Monday’s guidance moves the administration’s effort into ordinary lending decisions by directing banks and credit unions to examine whether a borrower’s income and continued presence in the United States are reliable enough to support repayment.
Policy shifts from Biden-era warning
The new guidance reflects a broader change in federal policy. In January, the Consumer Financial Protection Bureau and Justice Department withdrew a 2023 joint statement that had warned immigration-related lending policies could violate federal fair-lending protections in some circumstances.
The withdrawal notice said federal law permits lenders to consider immigration status when it affects creditworthiness or the lender’s ability to recover a debt.
A June 8 CFPB statement said creditors may consider information bearing on a borrower’s continuing ability to earn U.S.-based income when residence in the country is necessary for that employment.
Lenders must still comply with the Truth in Lending Act, the Equal Credit Opportunity Act and their implementing regulations. The agencies framed Monday’s action as guidance on existing obligations, not a blanket rule barring credit to every noncitizen or borrower without work authorization.
Provided by Dallas Express
