US Regulators Warn Banks on Lending Risks from Immigrants Living Illegally
WASHINGTON — Three federal banking regulators issued joint guidance on Monday warning financial institutions that lending to individuals who are not legally authorized to work in the United States may present “elevated credit risk,” the latest in a series of Trump administration measures designed to discourage people living in the country without legal status from using the nation’s banking system.
The guidance, issued by the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA), advises banks to “identify, measure, monitor, and control” these risks through safe and sound underwriting practices that assess a borrower’s capacity to repay. The AP News reported that the agencies said people working in the U.S. illegally pose overall risk to the financial system, as deportation could prevent borrowers from repaying loans.
Policy Reversal from the Biden Era
The guidance represents a complete reversal from the approach of the previous administration. In October 2023, the Consumer Financial Protection Bureau (CFPB) and the Justice Department’s civil rights division issued a joint statement urging lenders to ignore a potential borrower’s immigration status. In January 2025, the incoming Trump administration withdrew that statement, arguing it conflicted with the Equal Credit Opportunity Act, which explicitly states that “a creditor may take the applicant’s immigration status into account.”
The new guidance is issued under Executive Order 14406, “Restoring Integrity to America’s Financial System,” signed by President Donald Trump in May 2026. That order required banks and other financial institutions to take a closer look at the citizenship of their customers and instructed regulators to identify signs that people without legal status are opening accounts or obtaining loans.
A Broader Regulatory Crackdown
Monday’s guidance is the culmination of a multi-agency effort that has unfolded over recent months. In June, the Financial Crimes Enforcement Network (FinCEN) issued an advisory warning banks about identity theft, payroll tax fraud, and money laundering schemes tied to hiring unauthorized workers. Treasury Secretary Scott Bessent said at the time: “This Administration will not allow illegal aliens to abuse financial institutions to steal billions of dollars from hardworking American taxpayers.”
The CFPB followed on June 8 with a statement reminding creditors that Regulation Z enables lenders to consider a consumer’s immigration status, lawful presence, and work authorization insofar as it bears on their ability to repay a loan from U.S.-based employment. In November 2025, the Treasury reclassified certain refundable tax credits as “federal public benefits,” barring some immigrant taxpayers from receiving them even if they file taxes.
The ‘Transition Risk’ Framework
The guidance applies a framework that Breitbart economics reporter John Carney described as resembling the “transition risk” approach regulators previously applied to climate policy. Banks are now expected to consider whether future government action — in this case, immigration enforcement and potential deportation — could weaken a borrower’s ability to repay a loan. Regulators also warned of potential “correlated credit deterioration” if banks have concentrated exposure to this population.
According to the FDIC’s official press release, the guidance advises financial institutions to carefully consider the CFPB’s June 8 statement on ability to repay and immigration status, which affirms that lenders may lawfully weigh immigration status as part of their underwriting process.
Housing Market Implications
The guidance could have significant effects on the housing market. A working paper from economists at the Federal Reserve Bank of Dallas found that illegal immigration substantially increased local housing demand from 2021 through 2024. The paper found that an inflow of unauthorized workers equal to 1% of local employment was associated with a 2.2% increase in home prices and a 1.4% increase in rents. Reduced mortgage availability for this population could relieve price pressure in some markets.
What Comes Next
The guidance does not explicitly mandate that banks remove customers without legal status, but it strongly encourages institutions to consider the risks. The likely result, analysts say, is tighter credit — banks may demand larger down payments, charge higher interest rates, or reject loan applications altogether when repayment depends on income from unauthorized work.
OCC Comptroller Jonathan Gould, in a speech Monday marking his first year in office, said lawful customers should be judged on “objective risk” rather than political beliefs or reputational considerations. He made clear that the OCC would demand “greater direct and sustained attention from bank decision-makers and faster remediation timeframes,” particularly at the largest banks.
There is limited data on how many people in the U.S. illegally hold bank accounts and loans, but the estimated population runs into the millions. Tax experts have noted that immigrants brought to the U.S. illegally as children — known as DACA recipients — and those with Temporary Protected Status could also be affected by the changes, even though these groups have some form of legal presence.
The guidance is expected to face legal challenges, and questions remain about how banks will implement the new requirements in practice, given the difficulty of verifying immigration status without triggering discrimination concerns.