Yesterday, the U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) (collectively, the agencies) issued a joint statement on the subject of creditors’ use of immigration status for eligibility for credit transactions, an issue that has been kicking around in private litigation for years, but as to which the federal regulators have been silent. The joint statement warns lenders that “unnecessary or overbroad” reliance on immigration status in the credit decisioning process may violate the Equal Credit Opportunity Act (ECOA) and other federal laws. According to the agencies, the joint statement was issued in response to consumers reportedly being rejected for credit cards and loans because of their immigration status, even when they have strong credit histories and are otherwise qualified to receive the loans.
As background, ECOA prohibits discrimination by a creditor on the basis of race, color, religion, national origin, sex, marital status, age, an applicant’s receipt of public assistance, or the good faith exercise of an applicant’s rights under the Consumer Credit Protection Act. ECOA is implemented by Regulation B. While Regulation B provides that a “creditor may consider [an] applicant’s immigration status or status as a permanent resident of the United States, and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment,” the agencies emphasize it does not provide a safe harbor for all consideration of immigration status.
Immigration status may broadly overlap with or, in certain circumstances, serve as a proxy for [ ] protected characteristics [including race and national origin]. Creditors should therefore be aware that if their consideration of immigration status is not ‘necessary to ascertain the creditor’s rights and remedies regarding repayment’ and it results in discrimination on a prohibited basis, it violates ECOA and Regulation B.
To protect against a potential ECOA violation finding, the agencies recommend creditors evaluate whether their reliance on immigration or citizenship status is necessary to ascertain their repayment rights. Examples provided in the joint statement of circumstances that could warrant a potential finding of an ECOA violation include:
- A creditor who has a blanket policy of refusing to consider applications from certain groups of noncitizens regardless of the credit qualifications of individual borrowers.
- A creditor with a policy of placing undue consideration on certain criteria, such as how long a consumer has had a Social Security Number, which may serve as a proxy for citizenship or immigration status, which in turn, may implicate a protected characteristic.
- A creditor who requires documentation, identification, or in-person applications only from certain groups of noncitizens.
The agencies conclude their statement by warning that any claims that such policies are necessary to preserve the creditor’s repayment rights should be supported by evidence.
Although it is notable that the agencies issued this statement, and we assume that this means they will apply greater scrutiny to immigration status as used by creditors, the joint statement doesn’t give creditors any specific guidance about what to do. Rather, it consists of general statements about “overbroad” reliance on immigration status being illegal, while acknowledging that some consideration of immigration status is permissible. Creditors will be left to make their best judgments about whether their policies are permissible or “overbroad” and hope for the best.