Regulators advise banks to weigh immigration-related credit risks 

• Key insight: Regulators say banks should factor a consumer's immigration-related employment volatility into underwriting and risk calculation.
• Expert quote: "Lending to individuals who are not legally authorized to work in the United States may present elevated credit risk because a borrower's ability to generate income, maintain employment, and remain financially stable may be subject to greater uncertainty," — OCC, FDIC and NCUA. 
• Forward look: The guidance is the latest in the administration's broader push to align banking supervision with its deportation agenda and a May executive order on immigration. 

Bank and credit union regulators issued joint guidance on Monday reminding firms to pay attention to credit risks associated with undocumented immigrant borrowers unauthorized to work in the U.S.
The guidance — issued jointly by the Federal Deposit Insurance Corp., National Credit Union Administration and the Office of the Comptroller of the Currency pursuant to a May executive order — says undocumented borrowers' income streams are more volatile and could be impacted if they are removed from the U.S. abruptly, given the administration's aggressive immigration crackdown. 

"Lending to individuals who are not legally authorized to work in the United States may present elevated credit risk because a borrower's ability to generate income, maintain employment, and remain financially stable may be subject to greater uncertainty," the agencies wrote. "As with all lending activities, financial institutions should identify, measure, monitor, and control these risks through safe and sound underwriting practices that assess a borrower's willingness and capacity to repay according to the terms of the credit obligation."

Regulators encouraged firms to verify employment income of their borrowers to ensure it is current, stable and likely to continue using relevant documentation. They suggested banks may want to flag whether loans to undocumented workers, regardless of the status of repayment, are categorically risky. They also advise institutions to be wary of their ability to recover collateral. 

"Financial institutions may consider whether loans to non-work authorized borrowers, individually or segments, exhibit signs of credit weakness regardless of delinquency status for classification purposes and treatment in the allowance for credit losses," they wrote. "Financial institutions may face additional challenges enforcing security interests in collateralized loans, as it may be more difficult to contact non-work authorized borrowers or locate and repossess unaffixed collateral."

They warn that "changes in immigration enforcement" could affect banks with concentrated exposure to undocumented borrowers and that such changes could "adversely affect the repayment capacity of multiple borrowers simultaneously."

The guidance also points banks to the Consumer Financial Protection Bureau's June 8 statement on how immigration status could affect borrowers' ability to repay. Regulators noted that the Truth in Lending Act and Regulation Z require mortgage lenders to make a reasonable, good-faith determination that a borrower can repay a loan, and suggest banks consider whether a consumer's income depends on remaining in the U.S. 

Regulation and compliance

Compliance expectations muddied with immigration advisory

June 12, 2026 6:00 AM

By Ebrima Santos Sanneh

The guidance comes as part of the administration's implementation of a May executive order entitled "Restoring Integrity to America's Financial System." The EO instructs the Treasury Department, bank regulators and the CFPB to issue these kinds of guidance to banks on "red flags" to identify the informal work arrangements upon which undocumented workers may rely.

In June, the same three regulatory agencies along with the Treasury Department's Financial Crimes Enforcement Network warned banks to watch for signs of unauthorized employment schemes, payroll fraud and identity theft they say can facilitate tax evasion and transnational criminal activity. As part of that Fincen guidance, banks were encouraged to scrutinize activity connected to potentially unauthorized employment, as well as identity theft, payroll fraud, shell companies and the use of individual taxpayer identification numbers — nine-digit IRS-issued numbers often used by those required to file a return but not eligible for a Social Security number. 

The administration was considering compelling banks to verify citizenship of their customers, but scrapped the idea after industry pushback. While the guidance ultimately has been more manageable than verifying individual customers, the administration's immigration policies have put pressure on firms to adjust customer monitoring, revisit customer due diligence procedures and potentially prepare to justify those decisions to examiners.