Last week marked a significant shift in the examination of creditors’ utilization of immigration status to determine the eligibility for credit transactions, with some long-awaited guidance from the U.S. Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB). According to a joint statement by the agencies, this issue has been amidst private litigation for years, while federal regulators maintained their silence.
In an unprecedented move, the CFPB and the DOJ have warned lenders against the “unnecessary or overbroad” application of immigration status during credit decision making, a practice that was previously under the radar of federal regulation. In fact, the statement implies an increased monitoring of the financing sector, implying potential implications for both commercial lenders and consumers. However, the granular details of these implications remain to be seen and understood fully.
While the issuing of the joint statement does not change existing legislation or present new requirements, it does cast a spotlight on the sector’s practices. It simultaneously serves as a reminder for credit organizations to revisit their underwriting criteria as it pertains to the relevance and utilization of immigration status.
How the commercial lending sphere will respond to this latest guidance and what measures will they take to accommodate this shift, however, remains to be seen. As always, any actions taken will eventually unfold in the context of broader regulations and laws that govern the consumer finance landscape. As this story develops, more insights will undoubtedly come to the forefront.
For more in-depth information and updates on this developing issue, refer to the full report by Troutman Pepper.