The Consumer Financial Protection Bureau and Department of Justice announced they have withdrawn a joint statement regarding creditors' consideration of immigration status under the Equal Credit Opportunity Act, reversing guidance issued during the previous administration that warned such practices could violate fair lending laws in certain circumstances.
The October 12, 2023 joint statement had cautioned that creditor policies related to an applicant's immigration or citizenship status could run afoul of ECOA's and Regulation B's prohibition of discrimination on the basis of protected classes, including race and national origin. The agencies said they withdrew the statement "to avoid any conflict with the express language of ECOA and its implementing regulation, Regulation B."
The withdrawal allows lenders to freely consider immigration status when evaluating creditworthiness, particularly when necessary to avoid financial risks and comply with other laws. The agencies emphasized that ECOA and Regulation B permit creditors to consider pertinent elements of creditworthiness and information necessary to protect creditor rights and remedies, including a borrower's immigration or citizenship status.
The move represents a significant policy reversal on fair lending enforcement, signaling the current administration's more permissive approach toward immigration-related credit considerations. The withdrawal also addresses potential confusion about compliance standards and removes what the agencies characterized as unnecessary regulatory burdens on lenders.
"For decades, ECOA regulations have permitted lenders to consider a borrower's lawful residence status and other information necessary to protect their rights and remedies with respect to repayment," said Acting Director Russell Vought at the Consumer Financial Protection Bureau. Assistant Attorney General Harmeet K. Dhillon at the Justice Department's Civil Rights Division added that "the federal government is committed to avoiding statements that could confuse the law or imply compliance standards for civil rights laws that lack any statutory or regulatory basis."
The withdrawal also addresses any misimpression that the joint statement interpreted 42 U.S.C. § 1981 to confer liability under the statute that has not already been recognized by courts. The agencies said the action was appropriate to avoid unnecessary burdens from new or increased compliance efforts by financial institutions.
The policy change will likely provide greater clarity for lenders who had been navigating potential fair lending risks when considering immigration status in credit decisions, while potentially raising concerns among consumer advocates about access to credit for noncitizen borrowers.