According to a new report from Consumer Finance Monitor, on July 13, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the National Credit Union Administration (NCUA) released interagency guidance to remind the financial institutions under their supervision of their ongoing safety and soundness responsibilities when providing credit to individuals who lack legal authorization to work in the U.S.
To date, the Federal Reserve Board has not issued any similar guidance.
This guidance is in line with President Donald Trump’s Executive Order 14406, titled Restoring Integrity to America’s Financial System, which was issued on May 19.
That executive order instructed federal banking agencies to tackle the risks posed to the financial system by extending credit and financial services to individuals deemed “inadmissible” or “removable” under immigration laws.
The report showed that while the guidance does not create new legal obligations, it indicates the expectations of certain federal bank regulators regarding how supervised institutions should assess and manage the credit risks linked to lending to borrowers whose lawful employment status in the U.S. may be questionable.
The guidance closely follows the Consumer Financial Protection Bureau’s (CFPB) Statement on Ability to Repay and Immigration Status issued on June 8, 2026, which discussed the significance of immigration status in relation to the ability to repay requirements under the Truth in Lending Act for credit cards and mortgage loans, as well as the Equal Credit Opportunity Act.
“Inadmissible” refers to individuals ineligible to enter the U.S. or ineligible to receive or renew visas and “removable” refers to individuals who may be legally deported.
Safety and Soundness Standards: An Overview
The agencies stressed that the guidance serves as a reminder of current supervisory expectations rather than establishing new underwriting standards. Financial institutions are expected to persist in utilizing safe and sound underwriting practices that assess a borrower’s willingness and ability to repay a loan in accordance with its terms, according to the guidance..
The agencies note that borrowers lacking legal authorization to work in the United States may pose a higher credit risk due to the increased uncertainty surrounding their ability to generate income, sustain employment, and maintain financial stability. Therefore, the agencies said, institutions should evaluate whether these uncertainties impact repayment capacity and other conventional underwriting considerations.
The guidance outlines various aspects that institutions must consider when underwriting loans for borrowers who lack authorization to work in the U.S., referred to as “non-work authorized borrowers.” Source of repayment. Since employment income typically serves as the main source of repayment, institutions are advised to evaluate the stability and sustainability of that income.
The agencies highlight several risks that could hinder repayment, such as:
- termination of employment because the borrower lacks legal work authorization;
- expiration of employment authorization;
- inability to obtain lawful reemployment; and
- removal from the U.S.
The agencies encourage lenders to consider whether repayment capacity would remain adequate under scenarios involving interruptions in employment or income.
Collateral considerations are also on the list.
The guidance notes that lenders may encounter additional challenges enforcing security interests if non-work authorized borrowers become difficult to contact or locate or leave the United States. These concerns may be particularly relevant for movable collateral such as automobiles, recreational vehicles, and boats.
Documentation and verification is included. Institutions are advised to confirm that employment income is up-to-date, stable, and expected to persist by examining documentation such as pay stubs, W-2 forms, tax returns, employer verifications, bank statements, and, when applicable, proof of ongoing work authorization. The agencies also remind institutions to assess whether loans to borrowers without work authorization require special consideration for credit classification and provisions for credit loss.
Portfolio concentration risk is a significant concern. The agencies also emphasize the importance of assessing risk at the portfolio level. Institutions that have a high concentration of borrowers working in specific industries, geographic regions, or for particular employers that might be adversely impacted by immigration enforcement or workforce disruptions should consider the potential for simultaneous deterioration among multiple borrowers.
Consumers, Compliance & Considerations
The guidance further emphasizes the CFPB’s Statement on Ability to Repay and Immigration Status dated June 8. The CFPB clarified that, in accordance with the Truth in Lending Act and Regulation Z, mortgage lenders and credit card issuers are required to make a reasonable and good-faith assessment of consumers’ ability to repay their loans.
In instances where repayment is contingent upon employment within the U.S., creditors are permitted, and in certain cases may be obligated, to evaluate information relevant to the consumer’s ongoing capacity to earn that income.
Additionally, the guidance indicates that the ECOA and Regulation B explicitly allow creditors to take into account an applicant’s immigration status, along with any other information necessary to ascertain the creditor’s rights and remedies concerning repayment. Therefore, the agencies clarify that the consideration of immigration status, when pertinent to credit risk and repayment, aligns with current federal law.
Similar to the CFPB statement, the federal banking agencies’ guidance lacks specifics on how financial institutions can balance compliance with safety and soundness, ability to repay, and fair lending obligations. Furthermore, the guidance seems to contradict the Trump Administration’s stance against the debanking of individuals or businesses.
Financial institutions such as banks, credit unions, and other regulated entities are being encouraged to evaluate their underwriting policies, documentation procedures, concentration risk oversight, and loss allowance methods to ensure that they adequately address these risks when applicable, especially in the context of residential mortgage lending.
In conclusion, while a significant portion of the guidance reiterates established safety and soundness principles, its issuance indicates that immigration-related credit risk has emerged as a key area of increased supervisory attention. Consequently, financial institutions should anticipate that FDIC, OCC, and NCUA examiners will assess the integration of these risks into underwriting and risk management practices in upcoming examinations.
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