Regulators issue guidance on lending risk by borrowers in US illegally

Key Points:

• The Trump administration is intensifying efforts to prevent undocumented immigrants from using the U.S. banking system by targeting financial institutions that lend to them.
• Financial regulators, including the OCC, FDIC, and NCUA, will issue guidance reminding banks to enforce know-your-customer requirements and assess credit risks related to borrowers without legal work authorization.
• The guidance highlights that undocumented borrowers pose a financial risk due to potential deportation impacting their ability to repay loans, urging banks to adopt safe underwriting practices.
• This initiative follows President Trump's May executive order directing banks to scrutinize the citizenship status of customers, alongside a Treasury advisory warning banks about fraud linked to unauthorized workers.
• Additional measures include reclassifying certain tax credits as federal public benefits, potentially affecting immigrants with DACA or Temporary Protected Status by limiting their access to such benefits.