To Consider or Not to Consider? Immigration Status under the ECOA

The CFPB and Department of Justice (“Agencies”) issued a joint statement (“Statement”) on the potential civil rights implications that can arise when a creditor considers an individual’s immigration status under the Equal Credit Opportunity Act (ECOA). Technically, a creditor may consider immigration status when necessary to ascertain rights regarding repayment. The Statement, however, makes clear that creditors need to be aware that “unnecessary or overbroad reliance on immigration status in the credit decisioning process” can give rise to potential violations of the ECOA’s antidiscrimination provisions.

The ECOA and its implementing Regulation B apply to all types of credit, including both personal and business credit. These rules generally prohibit discrimination in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex (which includes sexual orientation and gender identity), marital status, age, receipt of public assistance, or the good faith exercise of rights under the Consumer Credit Protection Act.

While immigration status is not a prohibited basis under the ECOA and Reg B, they do prohibit the use of immigration status to discriminate on the basis of national origin, race, or any other protected characteristic, which can all be closely tied to immigration status. Reg B provides one specific example of consideration of immigration status relating to repayment, indicating that:

“a creditor may consider [an] applicant’s immigration status or status as a permanent resident of the United States, and any additional information that may be necessary to ascertain the creditor’s rights and remedies regarding repayment.”

The Statement importantly highlights that Reg B does not provide a safe harbor for all consideration of immigration status so you cannot take the above quote and the fact that immigration status is not an express prohibited basis to mean there is a blanket acceptance of the use immigration status in credit decision making.

The main issue highlighted in the Statement is that immigration status may overlap with or serve as a proxy for protected characteristics, like national origin or race. The Statement is clear that if consideration of immigration status is not “necessary to ascertain the creditor’s rights and remedies regarding repayment” and it results in discrimination on a prohibited basis, it violates the ECOA and Reg B. This includes reliance on citizenship status or “alienage” (i.e., an individual’s status as a non-citizen). For example, a blanket policy of refusing to consider applications from certain groups of noncitizens, regardless of their credit qualifications, may risk violating the ECOA and Reg B.

In addition, overbroad consideration of certain criteria – such as how long a consumer has had a Social Security Number – may serve as a proxy for citizenship or immigration status, which in turn, may implicate a protected characteristic like national origin or race. Similarly, requiring documentation, identification, or in-person applications only from certain groups of noncitizens may violate the ECOA and Reg B.11