Key facts
- Federal banking regulators issued guidance on managing credit risk for borrowers without work authorization.
- The guidance stems from a May executive order by President Donald Trump directing agencies to address financial system risks.
- Institutions are directed to evaluate repayment risks through existing underwriting and risk management practices.
- The guidance does not prohibit lending based on immigration status but emphasizes risk assessment.
- The guidance also addresses portfolio and concentration risk, beyond individual credit risks.
Federal banking regulators have issued new guidance reminding financial institutions of their existing obligations for managing credit risk when lending to borrowers who are not legally authorized to work in the U.S. The guidance, from the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC), and the National Credit Union Administration (NCUA), stems from a May 19 executive order by President Donald Trump.
The executive order directed federal agencies to address perceived risks to the financial system from providing credit or financial services to individuals considered inadmissible or removable under immigration laws. It requested that banking regulators issue guidance on managing credit risks associated with borrowers without work authorization within 60 days.
The new guidance does not prohibit financial institutions from lending to these borrowers but directs them to evaluate repayment risks through existing underwriting and risk management practices. Institutions are advised to identify, measure, monitor, and control these risks using safe and sound underwriting practices that assess a borrower's willingness and capacity to repay. The regulators also pointed institutions to a June 2026 statement from the Consumer Financial Protection Bureau (CFPB) on ability-to-repay requirements and immigration status.
Legal experts described the guidance as a "reminder of existing obligations" rather than new requirements. An addition in the interagency statement is the discussion of portfolio and concentration risk, examining whether certain geographic areas, employers, or industries may be susceptible to credit deterioration due to immigration enforcement. The guidance may also provide lenders comfort in asking questions to satisfy ability-to-repay requirements under post-Dodd-Frank regulations.
This guidance follows a recent advisory notice from the Treasury's Financial Crimes Enforcement Network (FinCEN) warning financial institutions about potential identity theft, payroll tax fraud, and money laundering risks associated with hiring unauthorized workers.