On October 12, the CFPB and DOJ issued a joint statement that reminds financial institutions that all credit applicants are protected from discrimination on the basis of their national origin, race, and other characteristics covered by the ECOA, regardless of their immigration status. According to the CFPB and DOJ, the statement was issued because consumers have reported being rejected for credit cards as well as for auto, student, personal, and equipment loans because of their immigration status, even when they have strong credit histories and ties to the US and are otherwise qualified to receive the loans.

The agencies stated that some financial institutions have maintained blanket policies denying credit to individuals based on their immigration status, regardless of their personal circumstances and demonstrated ability to repay, arguing that the ECOA and Regulation B, protect them whenever they consider immigration status in making a credit decision. The agencies further claim that other financial institutions have incorrectly claimed that the ECOA shields lenders from liability under other federal and state civil rights laws that bar discrimination on the basis of someone’s status as an immigrant or noncitizen.

The joint statement explains that while the ECOA allows creditors to consider immigration status when necessary to ascertain the creditor’s rights regarding repayment, unnecessary or overbroad reliance on immigration status may violate the ECOA’s prohibition of discrimination on the basis of national origin, race or another prohibited basis. The joint statement also confirms that neither the ECOA or Regulation B provide companies a safe harbor with respect to other laws barring discrimination on the basis of immigration status.

Putting It Into Practice: While the ECOA allows a creditor to consider an applicant’s immigration status when necessary to ascertain the creditor’s rights regarding repayment, creditors should be aware that unnecessary or overbroad reliance on immigration status, including when that reliance is based on bias, may run afoul of the law.