Labor & Employment Law Daily Wrap Up, IMMIGRATION NEWS—Fed guidance details risk management obligations on non-work authorized borrowers, (Aug 17, 2026)

By Jeff Williams

The Fed's action follows similar guidance issued last month by the FDIC, NCUA, and the OCC.

The Federal Reserve Board has issued guidance to supervised banking organizations reminding them of their risk management obligations regarding lending to borrowers who are not legally authorized to work in the U.S.

"Lending to individuals who are not legally authorized to work in the United States may present elevated credit risk because a borrower’s ability to generate income, maintain employment, and remain financially stable may be subject to greater uncertainty," the guidance said.

As with all lending activities, the Fed said, banking organizations should identify, measure, monitor, and control risks associated with lending to non-work authorized borrowers using "safe and sound underwriting practices that assess a borrower’s willingness and capacity to repay according to the terms of the credit obligation." Banking organizations lending to borrowers not legally authorized to work in the U.S. can "consider whether uncertainties related to employment authorization could affect the stability and sustainability of income, repayment capacity, collateral recovery, or other factors relevant to credit risk," the guidance said.

Considerations. The document covered four "key considerations" for banking organizations, including source of repayment, collateral, documentation and verification, and portfolio and concentration.

Noting the importance of the stability and sustainability of a borrower's income, the Fed said that because "wages or self-employment income are often the primary source of repayment for a credit obligation," a borrower's source of repayment "may be less reliable and may present increased credit risk" if that borrower's income is derived from employment that is not legally authorized. "Banking organizations may consider whether projected repayment capacity remains adequate under various scenarios, including potential interruptions in employment or income resulting from the borrower’s inability to maintain lawful employment," the guidance said.

The Fed also stated that banking organizations "may face additional challenges enforcing security interests in collateralized loans, as it may be more difficult to contact borrowers who are not legally authorized to work in the United States or locate and repossess unaffixed collateral (e.g., automobiles, recreational vehicles, boats)" and stressed that banking organizations "may consider whether the borrower’s employment income is current, verifiable, stable, and likely to continue." Banking organizations can require and review paystubs, W-2s, tax returns, employer verifications, bank statements, or evidence of continuing work authorization, the guidance said. They may also consider "whether loans to borrowers not legally authorized to work in the United States, individually or segments, exhibit signs of credit weakness regardless of delinquency status for classification purposes and treatment in the allowance for credit losses," the Fed said.

The agency also cautioned that banking organizations "may face elevated concentration risk if they have significant lending exposure to borrowers concentrated in specific geographic markets, employers, or industries that may be disproportionately affected by changes in immigration enforcement, employment verification practices, labor availability, or workforce disruptions." Those changes could "adversely affect the repayment capacity of multiple borrowers simultaneously" and could lead to banking organizations experiencing "correlated credit deterioration within affected segments of the portfolio rather than isolated borrower-level stress."

The Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) issued last month (see Banking and Finance Law Daily, July 14, 2026). That followed an executive order issued by President Trump directing federal financial regulators to issue guidance 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 (see Banking and Finance Law Daily, May 20, 2026).

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