Financial Institutions Cautioned Not to Use Immigration Status Against Credit Applicants – Immigration status cannot be used to “illegally discriminate against credit applicants, the United States Department of Justice (DoJ) and the Consumer Financial Protection Bureau (CFPB) warned last week. The agencies issued the statement to clarify to financial institutions that all credit applicants are protected from discrimination on the basis of their national origin, race, and other “characteristics” covered by the Equal Credit Opportunity Act (ECOA), regardless of their immigration status.
The two agencies further announced that the joint statement was released due to consumers reporting that they have been 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 and ties to the United States and are otherwise qualified to receive the loans.
The ECOA does allow a creditor to consider an applicant’s immigration status when necessary to ascertain the creditor’s rights regarding repayment, but the agencies reaffirmed that creditors should be aware that unnecessary or overbroad reliance on immigration status, including when that reliance is based on bias, may run afoul of the law.
“Lenders should not deny people the opportunity to take out a loan to buy a home, build their businesses or otherwise pursue their financial goals because of unlawful bias and without regard to their actual ability to repay,” said Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division. “This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.”
Blanket Policies
According to the two agencies, some financial institutions have maintained blanket policies denying credit to individuals based on their immigration status, regardless of their personal circumstances and demonstrated ability to repay. The institutions have argued that the ECOA, and the regulation that implements it, protect them whenever they consider immigration status in making a credit decision.
“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. In addition, the overbroad consideration of certain criteria – such as how long a consumer has had a Social Security Number – may implicate or serve as a proxy for citizenship or immigration status, which in turn, may implicate a protected characteristic under ECOA like national origin or race,” the DoJ/CFPB explained in the statement.
It further added that 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
Example of Bad Actions
CFPB offered one example from a couple in Texas that was denied a loan despite high credit scores and “very good income.” Upon learning that one of the applicants was an immigrant with protection under the Deferred Action for Childhood Arrivals (DACA), the loan agent said they did not qualify.
It appears that some financial institutions have reportedly incorrectly claimed that the ECOA actually shields lenders from liability under other federal and state civil rights laws that bar discrimination on the basis of someone’s status as an immigrant or noncitizen.
“Fair access to credit is crucially important for building wealth and strengthening household financial stability,” said CFPB Director Rohit Chopra. “The CFPB will not allow companies to use immigration status as an excuse for illegal discrimination.”
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A Senior Editor for 19FortyFive, Peter Suciu is a Michigan-based writer. He has contributed to more than four dozen magazines, newspapers, and websites with over 3,200 published pieces over a twenty-year career in journalism. He regularly writes about military hardware, firearms history, cybersecurity, politics, and international affairs. Peter is also a Contributing Writer for Forbes and Clearance Jobs. You can follow him on Twitter: @PeterSuciu.
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