US withdraws policy restricting lending bias against immigrants: Explained
US lenders can now factor immigration status in credit decisions, but core protections remain
 "US withdraws policy restricting lending bias against immigrants: Explained")
The United States has withdrawn a policy statement that had cautioned banks and lenders against practices that could unfairly disadvantage immigrant borrowers. The move is likely to give financial institutions more flexibility in how they assess loan applications from non-citizens, while keeping existing anti-discrimination laws intact.
The decision is relevant for Indian professionals, students and entrepreneurs living in the US, many of whom depend on credit for housing, education and business needs.
What policy has been withdrawn?
According to the US Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB), a joint statement issued in October 2023 has been formally withdrawn with effect from January 12.
The 2023 guidance had warned lenders that relying heavily on a borrower’s immigration or citizenship status could amount to discrimination under the Equal Credit Opportunity Act (ECOA). It argued that such practices could indirectly disadvantage protected groups based on race or national origin.
However, the DOJ said in its press release that the statement was non-binding and had created confusion about what the law actually allows.
Why did the US government reverse its position?
According to a notice published in the Federal Register, the withdrawal aligns policy with the text of ECOA and its implementing rule, known as Regulation B.
These laws, the notice said, explicitly allow lenders to consider immigration or citizenship status for legitimate reasons, such as:
- Assessing repayment risk
- Protecting a lender’s legal rights and remedies
- Meeting regulatory obligations such as Know Your Customer and anti-money laundering rules
The Federal Register notice added that ECOA does not impose a blanket ban on using immigration status in credit decisions.
Assistant Attorney General Harmeet K. Dhillon said, as quoted in the DOJ release, that the government wanted to avoid guidance that “could confuse the law or imply compliance standards” without a clear legal basis.
Acting CFPB Director Russell Vought said that existing regulations have long allowed lenders to consider lawful residence status when it is relevant to repayment and risk.
What does this mean for borrowers?
The withdrawal does not change the core protections under ECOA. Lenders in the US are still prohibited from discriminating on grounds such as race, colour or national origin.
However, according to the Federal Register notice, banks now have clearer backing to factor in immigration-related details when making lending decisions, provided these are used for valid, risk-related purposes.
For Indian citizens in the US, such as those on H-1B work visas, student visas or other temporary permits, this could mean closer scrutiny of visa duration, employment stability and residency status during loan applications.