U.S. bank regulators warn firms on lending to undocumented workers

By Pete Schroeder

WASHINGTON, July ‌13 (Reuters) - Banks ​should ​be cautious of lending to people not legally authorized to work in the United States, as their income ‌may be less reliable or they may be deported, ⁠a pair of U.S. bank regulators cautioned the industry Monday.

In new guidance, the ‌Office of the Comptroller ‌of the Currency, which supervises the nation's largest banks, and the Federal Deposit Insurance Corporation said non-citizens working in the ​U.S. illegally may have "less reliable" income and as a result may be a higher credit risk. The National Credit Union ⁠Association, which monitors credit unions, also issued the guidance.

"When a borrower’s income is derived ​from employment that is not legally authorized, the source of repayment may be less reliable and may present ​increased credit risk," the guidance stated. ‌Among reasons repayment could be riskier include loss of employment due to nonlegal status, an inability ⁠to become legally employed, or a borrower's removal from the United States.

The guidance, which is nonbinding and does not impose new requirements on ⁠banks but rather reminds them of existing obligations, is an effort to implement ​an executive order signed by President Donald Trump in May.

That order focused on the potential misuse of financial services by people living in the U.S. ‌illegally and directed the Treasury Department and other agencies to identify potential red flags for the ‌industry. That order was a lighter touch than one feared by ⁠the banking industry and ‌considered by the Trump ​administration, which would have directed banks to collect citizenship data on accountholders.

(Reporting by Pete Schroeder; Editing by ‌Chizu Nomiyama)

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