New Pressure on Financial Institutions
The Trump administration is moving to further restrict access to the U.S. banking system for people living in the country without legal status. The latest step focuses on financial institutions that provide loans to borrowers who are not authorized to work in the United States.
Regulators Prepare New Guidance
On Monday, a group of federal financial regulators is expected to issue guidance reminding banks and other lenders of their know-your-customer obligations. The notice focuses on credit risk management, especially when borrowers may lack work authorization in the U.S.
Part of a Broader Nine-Month Push
The warning is one of several actions taken by the administration over the past nine months to discourage people without legal status from using the broader American financial system. The measures are designed to push banks toward removing such individuals as customers without directly ordering institutions to do so.
Three Regulators Join the Announcement
The planned guidance is expected from the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union Association. Together, the agencies are emphasizing that banks should evaluate the risks associated with lending to people who may face removal from the country.
Deportation Framed as Credit Risk
The agencies argue that borrowers without legal status may pose repayment risks because deportation could affect their ability to meet loan obligations. In that framing, people working in the U.S. without authorization are presented as a broader risk factor for financial institutions.
Limited Data on Banking Use
There is limited public data on how many people living in the U.S. without legal status have bank accounts or loans through financial institutions. That makes the full scale of the issue difficult to measure, even as regulators increase scrutiny.
Executive Order Set the Process in Motion
The move follows an executive order signed by President Donald Trump in May. That order required banks and other financial institutions to examine more closely the citizenship status of their customers, helping trigger a new round of banking-related regulatory changes.
Accounts, Loans and Credit Cards Under Review
The executive order directed bank regulators and government departments to look for signs that people without legal status are opening bank accounts, obtaining loans or using credit cards. Monday’s guidance builds on that effort by focusing specifically on credit risk and underwriting practices.
What the Guidance Tells Banks
The guidance advises financial institutions to identify, measure, monitor and control risks through safe underwriting practices. It also tells lenders to assess a borrower’s willingness and ability to repay according to the terms of the credit obligation.
FinCEN Warning Came Earlier
In May, the Treasury Department’s financial crimes unit, FinCEN, issued a separate advisory to banks. That notice urged institutions to watch for identity theft, payroll tax fraud and money laundering schemes tied to the hiring of people who are not authorized to work in the United States.
More Than a Dozen Red Flags
The FinCEN advisory called on financial institutions to monitor for more than a dozen warning signs that could indicate an individual is in the country without legal status. The advisory became part of a wider compliance effort aimed at detecting financial activity connected to unauthorized employment.
Tax Credit Rules Also Targeted
The White House has taken additional steps outside the banking system. Last November, the Treasury Department announced plans to reclassify certain refundable tax credits as “federal public benefits”, a change that would prevent some immigrant taxpayers from receiving them.
Potential Impact on DACA and TPS Recipients
Tax experts said the planned change could affect immigrants brought to the United States as children under Deferred Action for Childhood Arrivals, known as DACA, as well as immigrants with Temporary Protected Status. These groups may file taxes and otherwise qualify for credits, but could lose access under the new classification.
A Financial System Strategy
The administration’s approach reflects a broader strategy of using financial regulation, tax policy and compliance rules to make it more difficult for people without legal status to participate in formal economic systems. Banks are not being expressly ordered to close accounts, but the regulatory pressure is increasing around customer screening, lending and risk assessment.
