WASHINGTON — The Trump administration is moving to further restrict access to the U.S. banking system for people living in the country without legal authorization, this time by targeting financial institutions that extend loans to undocumented borrowers.
A coalition of federal banking regulators is scheduled to release new guidance on Monday, reminding banks and other lending institutions of their know-your-customer obligations — particularly when it comes to managing credit risk involving borrowers who are not legally permitted to work in the United States.
The announcement is expected to come jointly from three federal agencies: the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Association. Together, they are warning that undocumented individuals may be unable to repay loans if they are deported, and that lending to such borrowers represents a broader risk to the financial system.
This latest move is part of a broader pattern. Over the past nine months, the Trump administration has rolled out a series of measures designed to strongly discourage banks from doing business with undocumented individuals — stopping short of an outright mandate, but sending a clear signal to financial institutions.
The effort traces back to an executive order signed by President Donald Trump in May, which directed banks and financial regulators to scrutinize the citizenship status of their customers. That order set off the current wave of banking policy changes, instructing regulators and government agencies to look for signs of undocumented individuals opening accounts, obtaining loans, or applying for credit cards.
According to a news release, Monday’s guidance advises banks to “identify, measure, monitor, and control these risks through safe and sound underwriting practices that assess a borrower’s willingness and capacity to repay according to the terms of the credit obligation.”
Also in May, the Treasury Department’s financial crimes unit — commonly referred to as FinCEN — sent an advisory to banks urging them to be on alert for identity theft, payroll tax fraud, and money laundering connected to the employment of unauthorized workers. That advisory listed more than a dozen warning signs that may indicate a customer is in the country illegally.
The White House has pursued additional financial restrictions as well. Last November, the Treasury Department announced plans to reclassify certain refundable tax credits as “federal public benefits,” a move that would bar some immigrant taxpayers from receiving those credits — even if they file and pay taxes and would otherwise be eligible.
Tax policy experts noted that recipients of Deferred Action for Childhood Arrivals — commonly known as DACA — as well as immigrants holding Temporary Protected Status, would likely be impacted by that planned change.
There is currently limited data available on how many undocumented individuals hold bank accounts or carry loans through U.S. financial institutions.
