US regulators urge banks to assess credit risk of undocumented workers
The move implements President Donald Trump’s May executive order but stops short of requiring banks to collect citizenship data, a measure the industry had feared.
US banking regulators have issued new guidance urging financial institutions to exercise caution when lending to individuals not legally authorised to work in the United States. The Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) stated that income derived from unauthorised employment may be less reliable, presenting increased credit risk for lenders.
The National Credit Union Association (NCUA) issued similar guidance, reinforcing the message across the broader financial sector. The documents note that repayment sources may be compromised by the loss of employment due to non-legal status, an inability to secure legal employment, or the potential removal of a borrower from the country.
This regulatory action serves to implement an executive order signed by President Donald Trump in May, which directed agencies to identify red flags regarding the potential misuse of financial services by undocumented residents. The guidance reminds banks of existing obligations rather than imposing new requirements, maintaining a non-binding framework for compliance.
The approach has been characterised as a lighter touch than what the banking industry had anticipated. Earlier proposals considered by the Trump administration would have directed banks to collect citizenship data on accountholders, a measure that was ultimately not adopted.
The reporting is attributed to Pete Schroeder with editing by Chizu Nomiyama.
