Dive Brief:

• The Consumer Financial Protection Bureau and the Justice Department issued a joint statement Thursday warning financial institutions against denying credit cards, auto loans and other forms of credit based on a person’s immigration status.
• The two government agencies cited the 1974 Equal Credit Opportunity Act, which bars discriminatory lending practices based on a borrower’s country of origin, race or other characteristics. The ECOA allows lenders to consider immigration status with regard to ability to repay, but “unnecessary or overbroad” consideration “may run afoul of the law,” the CFPB said in a Thursday press release.
• “Fair access to credit is crucially important for building wealth and strengthening household financial stability,” CFPB Director Rohit Chopra said in the release. “The CFPB will not allow companies to use immigration status as an excuse for illegal discrimination.”

Dive Insight:

The CFPB has received complaints from borrowers saying that despite a strong credit history and ability to repay, they are being rejected for loans and credit cards, based on their immigration status, the agency said. The CFPB didn’t specify when or how long it had been fielding these complaints. 

“Some financial institutions have maintained blanket policies denying credit to individuals based on their immigration status … arguing that the Equal Credit Opportunity Act, and the regulation that implements it, protect them whenever they consider immigration status in making a credit decision,” Thursday’s release said.

The federal watchdog also called attention to the issue last year, when it published a blog post saying it planned to address the needs of the roughly 44 million immigrants in the U.S. In last year’s post, the CFPB said it was responding to “dozens” of immigrant advocacy organizations.

On Thursday, in a blog post related to the joint statement, the CFPB highlighted a specific complaint of discrimination from 2021. In it, a lender in Texas is said to have discriminated against a consumer applying for an auto loan.

“On the phone, he mentioned how our credit scores and income were very good and we should not have any issues getting a final approval. It all changed when he requested a copy of our IDs and my girlfriend’s ID showed ‘Limited Term.’ He asked about her immigration status. When we advised that she is a XXXX person, he immediately said we did not qualify,” the complaint said.

Spokespeople for the CFPB and DOJ did not immediately respond to questions about Thursday’s joint statement.