Trump Regulators Move To Curtail Lending To Undocumented Immigrants

Federal regulators on Monday directed banks and credit unions to more closely scrutinize the loans they make to immigrants who are in the country illegally, as part of the Trump administration's broader immigration crackdown.

In new guidance, regulators said that undocumented immigrants may present an "elevated credit risk" and warned banks to account for the risk that they may lose their job or be deported as they underwrite new loans.

Financial institutions, the guidance says, should take into account that a customer's status as an unauthorized immigrant may pose a risk to their ability to repay credit cards, mortgages, auto loans or other loans.

The guidance also says that financial institutions "might consider" requiring customers to provide "evidence of continuing work authorization," among other documentation, as part of their assessment of a customer's ability to repay a loan.

It also directs banks to be on alert to lending that's concentrated in "geographic markets, employers or industries" that may be "disproportionately affected" by the Trump administration's stepped-up immigration enforcement.

The guidance was issued jointly by the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union Administration. It implements President Donald Trump's May executive order aimed at cutting off undocumented immigrants' access to the U.S. financial system.

That executive order instructed the Treasury Department and financial regulators to develop tougher due diligence rules governing how banks verify the identity of their customers and lend to undocumented immigrants.

Federal law does not prohibit banks from serving undocumented immigrants. But the White House order followed pressure from immigration hardliners and MAGA-aligned groups seeking greater progress on Trump's mass deportation campaign by pushing the administration to debank undocumented immigrants.

In a Truth Social post last month, Trump went further than the executive order, saying bank accounts used to "enable" illegal immigration should be shut down and seized, though he did not provide details on how the government would do so.

The Consumer Financial Protection Bureau separately issued guidance last month that similarly warned financial institutions about the credit risks associated with lending to immigrants who aren’t legally authorized to work.

The banking industry has expressed concerns about the burden associated with vetting customers for immigration status.

Treasury Secretary Scott Bessent last month defended the administration's efforts during a speech to banking executives, saying the administration was not seeking to add unnecessary compliance burdens or turn banks into immigration enforcers. Instead, he said the administration wanted banks to help fight financial crime.

Treasury has also issued a directive telling banks to identify red flags related to identity theft and payroll fraud that could be tied to illegal immigration.