Banks can’t use immigration status to 'illegally discriminate against credit applicants,' Biden admin warns

The Biden administration’s Department of Justice and the Consumer Financial Protection Bureau released a joint statement on Thursday warning banks that they may not use immigration status to “illegally discriminate against credit applicants.”

According to the DOJ, the statement “reminds 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.”

Consumers have allegedly reported having their credit applications for credit cards, auto, student, personal, and equipment loans rejected based on their immigration status, the joint statement stated. The agencies noted that even those with “strong credit histories and ties to the United States” have recently reported being refused lines of credit.

While the ECOA prevents financial institutions from rejecting applicants based on national origin, race, religion, sex, marital status, and age, it does not prevent banks from considering immigration status.

The DOJ and CFPB admit that the act “allows a creditor to consider an applicant’s immigration status when necessary to ascertain the creditor’s rights regarding repayment.” However, it warns, “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.” The agencies claimed that financial institutions may violate the ECOA’s “antidiscrimination provisions” and other laws.

The joint statement noted that some banks have implemented blanket policies that deny credit to individuals based on their immigration status, wrongly claiming that the ECOA “protect[s] them whenever they consider immigration status in making a credit decision.”

“Others have incorrectly claimed that the Act 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,” the agencies added.

The joint statement further noted that the ECOA does not “provide a safe harbor for all consideration of immigration status.”

The statement said, “Immigration status may broadly overlap with or, in certain circumstances, serve as a proxy for these protected characteristics,” referring to race and national origin.

Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division stated, “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.”

Clarke added, “This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law.”

CFPB director Rohit Chopra declared that the agency will not allow financial institutions to illegally discriminate against consumers based on their immigration status.

“Fair access to credit is crucially important for building wealth and strengthening household financial stability,” Chopra noted.

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