07/15/26

Federal banking regulators have issued new joint guidance reminding financial institutions to carefully evaluate the credit risks associated with lending to individuals who are not legally authorized to work in the United States.

The guidance follows a presidential executive order directing federal agencies to highlight potential risks related to the unlawful employment of undocumented individuals. Regulators emphasize that financial institutions should continue to apply sound credit risk management practices when evaluating all borrowers, while recognizing that employment authorization may affect a borrower's income stability, repayment capacity, collateral recovery and other factors that influence credit risk.

The guidance encourages banks to assess whether uncertainty surrounding a borrower's employment status could impact the long-term ability to repay a loan and to incorporate those considerations into existing underwriting and risk management processes.

In addition to the new lending guidance, several federal agencies have recently issued related information for financial institutions. Earlier this summer, the Consumer Financial Protection Bureau advised that immigration status may be a relevant consideration in certain mortgage and credit card lending decisions where permitted by law. The Financial Crimes Enforcement Network, in coordination with federal banking regulators and the Internal Revenue Service, also released an advisory encouraging financial institutions to remain alert to potential illicit activity associated with unlawful employment.

The Ohio Bankers League encourages member banks to review the new federal guidance and evaluate whether any updates to lending policies, underwriting procedures or risk management practices are warranted. Banks should continue to work with their legal and compliance teams to ensure lending decisions remain consistent with applicable laws, regulatory expectations and safe and sound banking practices.