Fed agencies release guidance on lending to undocumented workers

Lending to individuals who are not legally authorized to work in the U.S. may pose elevated credit risk for financial institutions, according to joint guidance issued by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the National Credit Union Administration.

President Trump issued an executive order in May this year directing regulators to provide guidance and warning financial institutions to be vigilant against risks posed by the unlawful employment of illegal aliens. The new joint guidance from the agencies implements that order by reminding financial institutions of their credit risk management obligations, particularly with respect to borrowers who are not legally authorized to work in the U.S.

“When lending to non-work-authorized borrowers, financial institutions should consider whether uncertainties related to employment authorization may affect the stability and sustainability of income, repayment capacity, collateral recovery, or other factors relevant to credit risk,” the agencies said in the joint document.