No fines here, but a supervisory signal that touches every loan book in the country. On July 13, the FDIC, OCC and NCUA told banks and credit unions they’re expected to weigh a borrower’s work authorization status as a credit risk factor, not a legal formality.
The trigger is Executive Order 14406, signed May 19, which ordered regulators to tighten scrutiny of credit extended to people who are “inadmissible” or “removable” under immigration law. The agencies frame it as a reminder of existing safety-and-soundness standards, not a new rule. That distinction matters less than it sounds. Examiners will now ask whether underwriting, collateral recovery and loss-allowance methodologies account for deportation risk, particularly in auto books with movable collateral, and in mortgage books through documentation and ability-to-repay review.
The Federal Reserve hasn’t signed on. That’s the tell. Three of four bank regulators moving in lockstep while the Fed sits it out suggests either a jurisdictional carve-out or genuine internal disagreement about how far safety-and-soundness authority should stretch into immigration enforcement. Worth watching whether the Fed follows or stays out entirely.
The guidance leans on the CFPB’s June 8 Statement on Ability to Repay and Immigration Status, which said lenders can factor immigration status into TILA ability-to-repay analysis. That statement never explained how to do that without tripping ECOA fair-lending exposure. This guidance doesn’t either.
Institutions with concentrated exposure to industries reliant on immigrant labor should expect examiners to probe portfolio correlation risk at the next cycle. No enforcement deadline yet. The exam cycle is the deadline.
— Marcus Webb