CFPB, DOJ warn against using immigration status to determine creditworthiness

Financial institutions risk violating federal protections against discrimination if they rely on immigration status to determine a consumer’s creditworthiness, the Consumer Financial Protection Bureau and Justice Department said today. In a joint statement, the two agencies said 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. Such rejections “may run afoul of the law,” they said. The American Bankers Association is carefully reviewing the guidance.

The Equal Credit Opportunity Act allows creditors to consider immigration status, but “unnecessary or overbroad” reliance on that factor may constitute discrimination based on national origin, race or other protected status, the CFPB and Justice Department said. “Such overbroad policies may harm applicants with these protected characteristics without being necessary to ascertain the creditor’s rights and remedies for repayment or to meet other binding legal obligations. Any claims that such 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 cannot be a pretext for discrimination.”

The agencies added that the ECOA’s allowance for considering immigration status does not provide a “safe harbor” from other laws that explicitly ban discrimination based on that status. “ECOA and other laws protect consumers and help ensure fair lending and credit opportunities for qualified borrowers,” they said. “Creditors should be mindful of those obligations as they relate to noncitizen borrowers and ensure that credit decisions are based on non-discriminatory criteria.”