Banking and Finance Law Daily Wrap Up, CONSUMER CREDIT—Agencies issue joint guidance on non-work authorized borrowers, (Jul 14, 2026)

By Sherri M. Schroeder, J.D.

FDIC, NCUA, and OCC issued the guidance to remind supervised financial institutions of their credit risk management obligations as they relate to borrowers not legally authorized to work in the U.S.

The Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) have issued a joint guidance entitled “Interagency Guidance of Lending to Individuals Not Legally Authorized to Work in the United States.” The guidance reminds all institutions supervised by the agencies of their existing credit risk management obligations as they relate to non-work authorized borrowers—or those individuals who are not legally authorized to work in the United States. The guidance emphasizes that these borrowers may present elevated credit risks because of the greater uncertainty in their ability to generate income, maintain employment, and remain financially stable. The guidance urges institutions to identify and control these risks through safe and sound underwriting practices, including assessment of a borrower’s willingness and capacity to repay.

The guidance was issued in response to President Donald Trump’s executive order, “Restoring Integrity to America’s Financial System,” which was issued in May 2026 (see Banking and Finance Law Daily, May 20, 2026). Among other things, this order directed federal financial regulators to issue guidance within 60 days regarding management of potential credit risk posed by the extension of credit or financial services to the “inadmissible and removable population,” which generally refers to those individual ineligible to receive visas and ineligible to be admitted to the United States and subject to removal under the Immigration and Nationality Act.

The guidance issued by FDIC, NCUA, and OCC is intended to remind supervised financial institutions—including community banks, per OCC’s Bulletin on the Guidance—of their existing obligations regarding credit risk management, “particularly as it relates to borrowers who are not legally authorized to work in the United States.” The guidance suggests these individuals may present elevated credit risk due to the “greater uncertainty” in their ability to generate income, maintain employment, and remain financially stable. Touting “safe and sound underwriting” as the key to risk management in this scenario, the guidance advises financial institutions to consider whether employment-authorization uncertainties may affect the stability and sustainability of income, repayment capacity, collateral recovery, and other credit-risk factors.

The guidance lays out five “key” underwriting considerations to assist covered financial institutions:

• Source of repayment. Wages or self-employment income are often the primary source of repayment in retail lending. However, when a borrower’s income comes from illegal employment, repayment “may be less reliable and may present increased credit risk.” According to the guidance, this is because employment may be terminated due to lack of legal work authorization or expired authorization, the borrower may be unable to become lawfully reemployed, or the borrower may be removed from the U.S. Therefore, institutions should consider whether projected repayment capacity remains adequate in consideration of “potential interruptions in employment or income resulting from the borrower’s inability to maintain lawful employment.”

• Collateral considerations. Financial institutions should consider whether it may be more difficult to contact non-work authorized borrowers or locate and repossess unaffixed collateral such as cars, recreational vehicles, and boats.

• Documentation and verification. Noting that “[f]inancial institutions may consider whether loans to non-work authorized borrowers, individually or segments, exhibit signs of credit weakness regardless of delinquency status for classification purposes and treatment in the allowance for credit losses,” the guidance suggests institutions consider whether employment is current, verifiable, stable, and likely to continue. It also suggests requiring and reviewing paystubs, W-2s, tax returns, employer verifications, bank statements, or evidence of continuing work authorization.

• Portfolio and concentration risk considerations. Noting that changes in immigration enforcement, employment verification practices, labor availability, or workforce disruptions could cause elevated concentration risks for financial institutions with significant lending exposures to borrowers concentrated in specific geographic markets, the guidance reminds institutions that these changes could adversely affect the repayment capacity of multiple borrowers simultaneously. This means that institutions may experience correlated credit deterioration within affected segments of their portfolios rather than isolated borrower-level stress.

• Consumer compliance risk. The guidance also highlights creditor obligations under the Truth in Lending Act as implemented by Regulation Z and the Equal Credit Opportunity Act as implemented by Regulation B. On June 8, 2026, the Consumer Protection Bureau issued its “Statement on Ability to Repay and Immigration Status” (see Banking and Finance Law Daily, June 5, 2026) as a reminder of these obligations. “The CFPB advises that, when determining repayment ability, creditors relying on an individual’s income derived from U.S.-based employment are permitted—and may, under certain facts and circumstances, be obligated—to consider information that bears on the consumer’s underlying and continuing ability to earn income—when residency in the United States is a necessary component of such employment,” states the guidance.

RegulatoryActivity: BankingOperations ConsumerCredit CrimesOffenses DepositInsurance EqualCreditOpportunity FinancialStability GCNNews Loans PrudentialRegulation TruthInLending