The Department of Justice (DOJ) put financial institutions on notice for rejecting illegal immigrants’ credit applications.
The DOJ issued the warning in a joint statement with the Consumer Financial Protection Bureau (CFPB) on Thursday. The DOJ and CFPB said in a press release that illegal immigrants had filed complaints about credit application rejections.
“The Justice Department and CFPB are issuing this statement because consumers have reported being rejected for credit cards as well as for auto, student, personal and equipment loans because of their immigration status, even when they have strong credit histories and ties to the United States and are otherwise qualified to receive the loans,” stated the agencies.
The two agencies claimed that the Equal Credit Opportunity Act (ECOA) protections for national origin and race extended to alienage, though they admitted that no such explicit provisions spelled out their interpretation. The agencies conceded that creditors could rely on immigration status to determine repayment ability, but then cautioned against “unnecessary or overbroad reliance” on immigration status.
“[W]hile ECOA and Regulation B do not expressly prohibit consideration of immigration status, they do prohibit creditors from using immigration status to discriminate on the basis of national origin, race, or any other protected characteristic,” said the agencies. “Immigration status may broadly overlap with or, in certain circumstances, serve as a proxy for these protected characteristics.”
Regulation B, which provides additional rules for evaluating credit applications, lists immigration status as a valid reason for denying an applicant to assure “creditor’s rights and remedies regarding repayment.” The agencies further asserted that since no explicit permissions existed, creditors couldn’t discriminate on the basis of citizenship status unless they could prove significant repayment concerns.
The agencies further warned against “overbroad consideration” of certain procedures, such as questioning the length of time an individual has possessed a Social Security number or requiring certain types of documentation, ID, or in-person application materials. The agencies warned that these screening tactics could be interpreted as unlawful discrimination on the basis of national origin or race.
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In closing, the agencies interpreted the 1866 Civil Rights Act, dubbed Section 1981, to declare that illegal immigrants have the same rights and protections as citizens.
“[C]reditors should be mindful of their obligations under 42 U.S.C. § 1981 (Section 1981) [which] has long been construed to prohibit discrimination based on alienage,” said the agencies. “[C]ourts have observed that ECOA’s prohibition of national origin discrimination and Section 1981’s prohibitions complement one another and that discrimination that arises from overbroad restrictions on lending to noncitizens may violate either or both statutes.”
The Supreme Court has not weighed in on whether Section 1981 extends to alienage, but the Fourth Circuit Court of Appeals did as recently as July.
Under the ECOA, the DOJ may sue those alleged to have engaged in a pattern or practice of discrimination concerning race, color, religion, sex, sexual orientation, and gender identity in addition to national origin.
According to the DOJ’s latest annual fair lending report from 2021, there were five referrals involving claims of race or national origin discrimination. The 2022 report has yet to be issued.
CFPB’s latest fair lending report, from 2022, did mention prioritizing the financial needs of immigrants. CFPB issued four referrals involving discrimination on the basis of race and national origin in mortgage lending to the DOJ last year.