The joint statement provides helpful guidance on the civil rights implications of considering an individual’s immigration status under the ECOA.
On October 12, 2023, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) issued a joint statement (the Joint Statement) to clarify the civil rights implications of considering an individual’s immigration status under the Equal Credit Opportunity Act (ECOA). The Joint Statement is intended to assist creditors and borrowers in understanding these implications.
The ECOA and its implementing regulations (known as Regulation B) do not expressly prohibit the consideration of immigration status. However, they do prohibit creditors from using immigration status to discriminate on the basis of national origin, race, or any other protected characteristic.[i] The DOJ and CFPB are responsible for enforcing the antidiscrimination provisions of ECOA, which are crucial for ensuring fair, competitive, and nondiscriminatory lending markets.[ii]
Potential Discrimination Risks
The Joint Statement emphasizes that creditors should remain aware that ECOA and Regulation B expressly forbid discrimination on the basis of certain protected characteristics, including race and national origin. Immigration status may broadly overlap with or, in certain circumstances, serve as a proxy for these protected characteristics. Therefore, if a creditor’s consideration of immigration status is not “necessary to ascertain their rights and remedies regarding repayment” and results in discrimination on a prohibited basis, it violates ECOA and Regulation B.
Guidance for Creditors
Creditors must ensure that they do not violate ECOA’s nondiscrimination provisions when considering immigration status, and in doing so, should always evaluate whether their reliance on immigration status, citizenship status, or “alienage” (i.e., an individual’s status as a non-citizen) is necessary or unnecessary to ascertain their rights or remedies regarding repayment. If a creditor is relying on immigration status for a reason other than determining its rights or remedies for repayment, and cannot show that such reliance is necessary to meet other binding legal obligations, the creditor may risk engaging in unlawful discrimination, including on the basis of race or national origin, in violation of ECOA and Regulation B.
Examples of Potential Violations
The Joint Statement also provides examples of potential violations of ECOA and Regulation B:
- Blanket Policies: A creditor should not maintain a blanket policy of refusing to consider applications from certain groups of noncitizens regardless of the credit qualifications of individual borrowers within that group. Such a policy may risk violating ECOA and Regulation B because some individuals within those groups may have sufficient credit scores or other individual circumstances that may resolve concerns about the creditor’s rights and remedies regarding repayment.
- “Proxy” Criteria: The Joint Statement also addresses the overbroad consideration of certain criteria by creditors, such as how long a consumer has had a Social Security Number. If such considerations are weighed too heavily, they may implicate or serve as a proxy for citizenship or immigration, which, in turn, may implicate a protected characteristic.
- Unequal Requirements: Similarly, creditors should avoid requiring certain documentation, identification, or in-person applications from certain groups of noncitizens only, and this requirement is not necessary for assessing the creditor’s ability to obtain repayment or fulfilling the creditors’ legal obligations.
The Joint Statement also discusses that the limited consideration of immigration status that is permissible under ECOA and Regulation B does not conflict with Section 1981. Section 1981 prohibits discrimination on the basis of race in the making and enforcement of contracts — ensuring that all individuals within the jurisdiction of the US have the same rights regarding contractual agreements as enjoyed by white citizens.[iii] However, creditors should be aware that they must comply with both statutes, and that discrimination that arises from overbroad restrictions on lending to noncitizens may violate either or both statutes.
ECOA and other laws protect consumers and help ensure fair lending and credit opportunities for qualified borrowers. Creditors should be mindful of those obligations as they relate to noncitizen borrowers and ensure that credit decisions are based on non-discriminatory criteria. The Joint Statement from the CFPB and DOJ serves as a reminder to creditors to uphold these obligations and avoid potentially discriminatory practices.
[i] 12 C.F.R. § 1002.6(b)(9).
[ii] The CFPB enforces ECOA with respect to any person subject to ECOA’s coverage, with limited exclusions under the Consumer Financial Protection Act. 15 U.S.C. § 1691c(a)(9). The DOJ enforces ECOA where there is evidence of a “pattern or practice” of discrimination. 15 U.S.C. § 1691e(h).
[iii] 42 U.S. Code § 1981.