Last month, the Justice Department (DOJ) and the Consumer Financial Protection Bureau (CFPB) issued a joint statement that reminded financial institutions that all credit applicants are protected from discrimination on the basis of their national origin, race and other characteristics covered by the Equal Credit Opportunity Act (ECOA), regardless of their immigration status.
According to the press release, the reminder was prompted by an increase in consumers’ reporting to the DOJ and CFPB that they were rejected for credit cards, as well as other types of loans, because of their immigration status, despite their strong credit history and ties to the United States and that they are otherwise qualified to receive the credit card or loan.
The ECOA, commonly known as Regulation B, prohibits credit discrimination on the basis of sex (including gender orientation and sexual identity), marital status, race, color, religion, national origin, age, receipt of public assistance and the good faith exercise or rights under the Consumer Credit Protection Act. The official interpretation of Section 1002.6(b)(7) of Regulation B specifically permits a lender to consider immigration status for the purpose of differentiating between a non-citizen who is a long-time resident with permanent resident status and a noncitizen who is only temporarily in the country on a student visa. The joint statement appears to undermine the official interpretation that “a denial of credit on the ground that an applicant is not a United States citizen is not per se discrimination based on national origin.” 12 C.F.R. 1002.6(b)(7).
This joint statement signals to lenders who reject otherwise worthy credit applicants on the basis of their immigration status could now be in violation of the ECOA and that the immigration status of an applicant may now be considered a protected class. This joint statement comes in the wake of an increased focus on fair lending by the DOJ and CFPB. For instance, last year, the CFPB revised it’s Unfair, Deceptive or Abusive Acts or Practices (UDAAP) exam manual to expand the definition of unfairness to include any discriminatory conduct in the offering of any financial product or service. The UDAAP exam manual was later vacated by the Eastern District of Texas in their September order in Chamber of Commerce v. CFPB, which held that characterizing discrimination as unfair went beyond the CFPB’s authority.