Three federal financial regulatory agencies issued joint guidance on July 13, addressing lenders with respect to their credit risk management obligations when extending credit to borrowers who lack authorization to work in the United States.
Issued by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the National Credit Union Administration, the guidance stated that “[l]ending to individuals who are not legally authorized to work in the United States may present elevated credit risk because a borrower’s ability to generate income, maintain employment and remain financially stable may be subject to greater uncertainty.”
Noting that “safe and sound underwriting is a key risk-management tool” for supervised financial institutions, the agencies emphasized that such entities “should identify, measure, monitor, and control these risks through safe and sound underwriting practices that assess a borrower’s willingness and capacity to repay according to the terms of the credit obligation.”
When lending to non-work authorized borrowers, the agencies advised financial institutions to consider whether the “uncertainties related to employment authorization may affect the stability and sustainability of income, repayment capacity, collateral recovery or other factors relevant to credit risk.”
The guidance was issued in accordance with Executive Order 14406, titled “Restoring Integrity to America’s Financial System.”
Additionally, the guidance advised financial institutions to carefully consider the Consumer Financial Protection Bureau’s June 8 “Statement on Ability To Repay and Immigration Status,” reminding creditors of their obligations under the Truth in Lending Act as implemented by Regulation Z, and the Equal Credit Opportunity Act, as implemented by Regulation B, as they relate to non-work authorized borrowers.