In a June 27 blog post titled "Identifying and addressing the financial needs of immigrants," the Consumer Financial Protection Bureau stated it is "committed to using [its] tools and authorities" to address systemic barriers and harmful financial practices directed at foreign-born consumers. The post raises more questions than it answers, including the specific category of consumers at issue, the practices that might be challenged and the "tools and authorities" the CFPB might use.
The blog post raises legitimate concerns of potential governmental overreach and signals enhanced legal risk to financial institutions in this complex area.
Suggesting possible new expectations regarding consumers who are not lawfully present in the United States, the blog post uses nine terms to describe the immigrant consumers at issue: "foreign-born residents," "foreign-born consumers," "unauthorized immigrants," "refugees," persons with varying "immigration status," "people with Deferred Action for Childhood Arrivals (DACA)," "those who use an Individual Taxpayer Identification Number (ITIN)," persons with "limited English proficiency," and "[h]umanitarian migrants [without] ... legal protection in the United States."
While some of these categories of consumer groups overlap, there are also important distinctions that regulatory guidance issued by the CFPB and other agencies have recognized — distinctions that turn on an individual's ability to demonstrate legal status. The blog post is unclear on whether the CFPB seeks to expand access to banking and credit services to reach individuals who are not legally present in the United States, and to challenge institutions that fail to help meet the financial needs of persons without legal status.
For example, the blog post expresses concern regarding practices that limit access to banking and credit services due to immigration status.
In the mortgage context, Fannie Mae and Freddie Mac have provided guidance for lending to non-U.S. citizen borrowers. Both government-sponsored enterprises purchase and securitize mortgages to non-U.S. citizens who are lawful permanent or nonpermanent residents in the United States on the same terms available to U.S. citizens. The focus is on documenting whether the borrower is "legally present" in the United States, and Fannie Mae guidance specifies that a showing can be made where a Social Security number is lacking if the borrower can provide an ITIN plus documentation showing lawful immigration status.
Concerns regarding access to financial services and products for consumers with limited English proficiency (LEP) — including consumers who are not foreign-born and thus do not fit within any other consumer category mentioned in the CFPB blog post — have existed for many years.
In 2021, after participating in "robust information-gathering activities" to "obtain feedback on the provision of financial products and services to LEP consumers," the CFPB released its "Statement Regarding the Provision of Financial Products and Services to Consumers with Limited Language Proficiency."
The CFPB's purpose in issuing the statement was to provide "guidance on how financial institutions can provide access to credit in languages other than English in a manner that is beneficial to consumers, while taking steps to ensure financial institutions' actions are compliant with the Equal Credit Opportunity Act (ECOA), the prohibitions against unfair, deceptive, and abusive acts and practices (UDAAPs,) and other applicable laws."
Recently, the Federal Housing Finance Agency announced that Fannie Mae and Freddie Mac will require lenders to use a new form, called the Supplemental Consumer Information Form, to collect information about the borrower's language preference. Inexplicably, the blog post references none of this guidance on the same topic.
While the CFPB's 2021 statement did not address all compliance concerns presented by the industry, it certainly was a step in the right direction. The recent blog post raises questions as to whether the bureau may now advocate different approaches for service of LEP consumers, presenting another major compliance risk for financial institutions.
Finally, the CFPB did not identify which "tools and authorities" it intends to utilize to address the financial needs of the consumer groups discussed in the blog post. The ECOA, which the bureau enforces and is implemented by Regulation B, prohibits discrimination on the basis of national origin, but it does not prohibit discrimination on the basis of citizenship status.
Indeed, Regulation B allows creditors to inquire about the permanent residency and immigration status of an applicant in connection with credit transactions. The CFPB stated that lenders may use this information to determine their "rights and remedies regarding repayment."
Federal courts, including the U.S. Supreme Court, have recognized the distinction between permissible decision-making on the basis of immigration status and impermissible decision-making on the basis of national origin. The Official Staff Commentary on Regulation B states "a denial of credit on the ground that an applicant is not a United States citizen is not per se discrimination based on national origin."
However, in March the CFPB stated that it would start using its UDAAP authority to "examine for discrimination in all consumer finance markets," a proposal that has generated controversy in the industry. It may be difficult for the CFPB to assert that conduct ECOA condones in the credit context constitutes unfair and abusive practices and therefore violates the UDAAP unfairness prong.
Perhaps the blog post is purposefully vague, but these types of issues relating to the provision of financial services to immigrants warrant continued monitoring.
