WASHINGTON — The Consumer Financial Protection Bureau is expected to issue guidance reminding lenders that a consumer’s immigration status may be a factor in evaluating their ability to repay mortgages and certain credit products.
Fox Business reported that the CFPB plans to publish a policy statement today in the Federal Register clarifying that lenders may consider whether a borrower can legally work and earn income in the United States when making credit decisions.
The policy statement does not carry the force of law and is not legally binding. Instead, it is intended to provide guidance to financial institutions regarding existing requirements under the Truth in Lending Act and Regulation Z, which require creditors to assess a consumer’s ability to repay before extending mortgages and certain open-end credit products.
When Obligation Arises
The CFPB said in the policy statement, as reported by Fox Business, that lenders may be obligated to consider a consumer’s immigration status when information in an application or related records indicates that the borrower’s ability to repay could change because of that status.
“The obligation arises if documentation in the consumer’s application or other records indicates that the consumer’s repayment ability will change on account of their immigration status,” the CFPB said in the statement.
The agency said lenders must consider such information in the same way they would consider any other factor indicating that a consumer’s repayment ability may change after a loan is originated.
Fox Business reported that the CFPB warned that failing to account for a reasonably expected change in income could undermine a lender’s ability-to-repay analysis and potentially conflict with regulatory requirements.
Example Cited
The guidance cites as an example borrowers who lack legal authorization to live or work in the United States and who could be subject to removal from the country, according to Fox Business. The report said lenders may identify such circumstances through direct inquiries or through information contained in loan applications, including the use of an Individual Taxpayer Identification Number, or ITIN.
The CFPB also emphasized that immigration status varies widely under U.S. law and that lenders should not assume consumers with different lawful statuses present identical repayment risks.
No Framework Provided
According to Fox Business, the agency declined to provide a comprehensive framework for evaluating every immigration category. Instead, the guidance focuses on reminding creditors of their obligations under Regulation Z to consider foreseeable changes in a borrower’s income when determining whether the consumer has the ability to repay a loan or line of credit.
