• Key Insight: The CFPB and DOJ said they withdrew the 2023 guidance to correct the misimpression that ECOA imposed limits on considering immigration or citizenship status in a credit application. 
• What's at Stake: The move is part of the Trump administration's effort to restore alignment with established federal civil rights law and vacate the Biden administration's interpretation of ECOA.
• Forward Look: The agencies confirmed that Regulation B permits creditors to "take the applicant's immigration status into account," in underwriting.

The Consumer Financial Protection Bureau and the Department of Justice withdrew guidance issued during the Biden administration that had cautioned lenders about denying credit to immigrants. 

On Monday, the CFPB and DOJ jointly withdrew a 2023 advisory opinion that said lenders could run afoul of the Equal Credit Opportunity Act, under certain circumstances, if they denied credit to noncitizens. In 2023, the CFPB also published a blog post claiming that denying credit based on citizenship or "immigrant status" may violate federal law.

The 2023 guidance issued by former CFPB Director Rohit Chopra "may have created the impression that either ECOA or the statement itself imposes limitations on the consideration of immigration or citizenship status when evaluating an application for credit," the two agencies said. "No such limitation exists, and this withdrawal is intended to correct any such misimpression."

The move is part of the Trump administration's broader efforts to significantly alter the interpretation and enforcement of ECOA. 

ECOA prohibits discrimination based on age, color, gender, marital status, national origin, race or religion. Regulation B, which implements ECOA, also requires that lenders provide a reason why an applicant is being denied credit. 

The 2023 advisory opinion acknowledged that the ECOA does not expressly prohibit consideration of immigration status. It said though that "unnecessary or overbroad reliance" on immigration status could run afoul of ECOA's antidiscrimination provisions.

Harmeet K. Dhillon, the assistant attorney general at the Justice Department's Civil Rights Division, said in a press release that the government is seeking to avoid statements that may be confusing or "imply compliance standards for civil rights laws that lack any statutory or regulatory basis."

Acting CFPB Director Russell Vought, who is also the director of the Office of Management and Budget and rarely issues comments, stated in a press release that ECOA has for decades permitted lenders "to consider a borrower's lawful residence status and other information necessary to protect their rights and remedies with respect to repayment." 

The agencies said that banks and lenders may have interpreted the previous 2023 guidance "to require new or increased compliance efforts," which made the advisory opinion appropriate for rescission under the bureau's revised policy. 

Advisory opinions are nonbinding, but the agencies noted that the 2023 opinion "may have created the misimpression that ECOA or Regulation B prohibit or otherwise limit the consideration of immigration or citizenship status by a creditor evaluating an application for credit."

"Nothing in ECOA or Regulation B prohibits the consideration of an applicant's immigration or citizen status," the agencies said. "To the contrary, Regulation B permits the consideration of 'any information obtained, so long as the information is not used to discriminate against an applicant on a prohibited basis.'"

More specifically, Reg B states that a "creditor may take the applicant's immigration status into account,"and "may consider the applicant's immigration status or status as a permanent resident of the United States, and any additional information that may be necessary to ascertain the creditor's rights and remedies regarding repayment," the agencies said. 

In addition, the CFPB and DOJ said that there is no "bright-line, one-size-fits-all approach to underwriting noncitizens as necessary for ECOA compliance." 

Many immigrants do not have a bank account and may be unable to prove their income, making it difficult for banks and lenders to underwrite them for credit. 

The agencies said a credit applicant's immigration or citizenship status "may present underwriting risks that typical assessments of financial capacity alone will not fully resolve."

"As Regulation B acknowledges, this is something creditors may legitimately consider. To the extent the joint statement suggested, or could be read to suggest, that the practices it describes are presumptively discriminatory in violation of ECOA, such a presumption would not be supported by ECOA or Regulation B."

Further, focusing exclusively on compliance risks, the agencies said, "ignores that creditors may legitimately use additional information in particular circumstances to fully assess underwriting risks related to providing credit to those without lawful status or who are otherwise unauthorized to work in the United States."