US withdraws policy expressly barring lending bias against immigrants

WASHINGTON, Jan 12 (Reuters) – The U.S. Consumer Financial Protection Bureau and the Department of Justice withdrew, opens new tab guidance expressly prohibiting lenders from discriminating against immigrants and ‌non-citizens on Monday, potentially denting immigrants’ legal ability to access loans.
Democratic former President Joe Biden issued the guidance in 2023 to clarify that lenders could use immigration or citizenship status when deciding loan applications, as long as it was not the only factor nor lead to bias or discrimination.

Although the underlying ‌law already bars lenders from discriminatory practices, the guidance sought to expressly clarify and enforce it to avoid discrimination.
Withdrawing the guidance further whittles away the remnants of any and all Biden-era regulations and fulfills President Donald Trump’s immigration policies, two key priorities of the ‍administration, according to Lori Sommerfield, a partner at Troutman Pepper Locke in the law firm’s consumer financial services practice.

The withdrawal of this joint guidance really underscores the Trump administration’s two key priorities: A harder line on immigration and ⁠a continued effort to scale back enforcement of the federal fair lending laws,” Sommerfield said.

Assistant ‍Attorney General Harmeet Dhillon, head of the DOJ’s Civil Rights Division, said in a joint statement with the CFPB ‌announcing ‌the policy that the Biden-era guidance had been “ideologically-driven,” adding that the withdrawal restored alignment with established federal civil rights law.

The withdrawal has an anti-immigration subtext in line with the broader Trump administration’s goals of a more aggressive immigration crackdown in the new year, according to former CFPB ⁠officials and consumer finance ⁠lawyers like Kris Kully, a partner at law firm Mayer Brown.
It could be interpreted as a wink and a nod to lenders, Kully said.

Last April, the administration began deploying tactics to encourage immigrants without legal status to self-deport. One such ‍tactic voided Social Security numbers issued while under temporary protected status.

A lender may simply implement a blanket policy requiring an active Social Security number to apply for credit that’s in line with the Trump administration’s policy, but could run afoul of the law as a pretext to ‍reject immigrants.

“That may be all part of the same thrust to just make it unpalatable and unaffordable, and in other ways just difficult to stay,” Kully said.