CFPB Clarifies How Immigration Status May Factor Into Ability-to-Repay Decisions

The Consumer Financial Protection Bureau (CFPB) recently issued a Statement on Ability to Repay and Immigration Status, providing additional guidance on how immigration status may be considered when evaluating certain credit applications.

Under federal law, lenders must make a reasonable determination that a borrower can repay a loan before extending certain types of credit, including many mortgage loans. This evaluation typically considers factors such as income, employment, assets, debt obligations, and credit history.

The CFPB's statement does not create new legal requirements. Instead, it clarifies that immigration status may be considered when it could reasonably affect a borrower's future income and ability to repay a loan. According to the CFPB, creditors are expected to evaluate both a borrower's current financial circumstances and foreseeable factors that could impact repayment.

The agency also emphasized that lenders must continue to comply with fair lending laws. The statement does not permit lenders to deny credit solely because an applicant is not a U.S. citizen. Rather, it explains that immigration status may be considered when it has a direct impact on a borrower's expected income and repayment capacity.

Credit unions should review the CFPB's guidance and consider whether their lending policies and procedures appropriately address ability-to-repay requirements while remaining consistent with fair lending obligations.

This article is based on reporting and analysis by America's Credit Unions and Keith Schostag, director of federal compliance at America's Credit Unions.