RSSThe Consumer Financial Protection Bureau and Department of Justice recently withdrew guidance warning lenders of the legal risks surrounding considering immigration status for credit.
The Jan. 12 action withdrew 2023 joint guidance under the Biden administration that cautioned lenders reviewing noncitizen borrowers against potential fair lending violations not to violate Regulation B’s banning of discrimination on the basis of race and national origin the Equal Credit Opportunity Act.
CFPB Acting Director Russell Vought said the withdrawal is to avoid it from clashing with the language of ECOA and Reg. B. “For decades, ECOA regulations have permitted lenders to consider a borrower’s lawful residence status and other information necessary to protect their rights and remedies with respect to repayment,” he said. “We are correcting the last administration’s attempt to ignore these well-accepted and common-sense principles of our nation’s fair lending laws.”
The Trump administration “is restoring alignment with established federal civil rights law rather than continuing the prior administration’s ideologically-driven departures,” said Harmeet Dhillon, assistant attorney general in the Justice Department’s Civil Rights Division.
When it issued the guidance, the Biden administration said it was to prevent lenders from using one-size-fits-all policies that rejected loan applicants based on only their immigration status, which it argued could be discrimination based on national origin or race.
Trade groups such as the Consumer Bankers Association and the American Bankers Association opposed the guidance, saying it created confusion and clashed with previous fair lending interpretations.
