A Republican senator led every Senate Banking Committee Republican in a letter to the Biden administration about a recent joint directive on illegal immigrants being approved for loans.
The letter from Ohio GOP Senator J.D. Vance is a response to an Oct. 12 directive from the Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB) warning lenders against solely denying lines of credit for mortgages, auto and other loans due to a borrower’s immigration status.
Signed by every member of the GOP members of the Senate Banking Committee, the letter to the Attorney General Merrick Garland and CFPB Director Rohit Chopra argues that the joint directive flies in the face of sound lending practices.
Financial “institutions are right to be concerned that they may never see a return on loans issued to illegal immigrants,” Vance told Fox News Digital
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“If someone is deported to their home country, how is a bank in Ohio supposed recoup the loan it was forced to issue?” Vance said. “The federal government should be cracking down on illegal immigration – not encouraging more of it.”
The DOJ and CFPB directive warns lenders that considering a borrowers’ immigration status when approving or denying loans may violate the Equal Credit Opportunity Act (ECOA).
“While the CFPB and DOJ note that financial institutions are permitted to consider immigration status under the ECOA, they claim that unnecessary or overbroad reliance on immigration status ‘may run afoul of the law,’ and that all borrowers, regardless of immigration status, are protected from discrimination,” the lawmakers wrote in the letter exclusive obtained by Fox News Digital.
“Specifically, your agencies claim that if a creditor has a ‘blanket policy’ on immigration status, then they risk violating fair lending laws,” the lawmakers continued. “The joint statement also suggests that as long as an applicant for credit has a good credit score and other ‘credit qualifications,’ then his or her immigration status should not matter.”
The Republicans wrote the “CFPB and DOJ’s joint directive not only flies in the face of responsible lending standards, risk-based pricing, and sound risk management, but also contradicts and rewrites decades worth of guidance from the CFPB and the federal banking regulators—all without an official rulemaking pursuant to the Administrative Procedures Act (‘APA’), giving financial institutions the chance to comment, or even offering any other semblance of advanced notice.”
The lawmakers wrote that they are “concerned that the CFPB and DOJ’s joint statement appears to be at odds with the official guidelines for various federal lending programs, many of which require U.S. citizenship or permanent residency to qualify.”
American financial institutions have looked to CFPB guidance since the agency took over governance of the ECOA upon its establishment in 2011, but the senators noted that former agency guidance that stated weighing immigration status when approving or denying loans was not discriminatory.
“Financial institutions have long relied on this guidance in their assessment of credit risk, and the abrupt upending of the CFPB’s interpretation of Reg B and ECOA not only poses serious compliance costs, but could also have detrimental impacts on the safety and soundness of the banking sector, and financial stability in the American economy more broadly,” the letter says.
The senators pointed out that at their “most fundamental level” when calculating risk and creditworthiness, financial institutions have “two goals: to determine the applicants likelihood of repayment and the lender’s ability to enforce the loan contract.”
“To that end, the importance of considering immigration status when assessing the potential of repayment is nothing short of common sense. Even the CFPB notes that an ‘applicant’s immigration status… could have a bearing on a creditor’s ability to obtain repayment.’ And if financial institutions cannot use immigration status in their assessment of risk, the potential of a widespread market event where a significant number of loans go into default is all the more likely.”
“In that event, the strain placed on financial institutions may pose a contagion effect and cause broader economic repercussions impacting the financial stability of the American economy,” they added.
The senators said the joint directive “conflicts with decades of immigration status-related guidance from CFPB and the Fed” and “poses serious risks to financial stability” by encouraging lenders to look past potential risk.
“Additionally, the fact that your agencies moved forward with this guidance outside of the APA rulemaking process, and without any advanced communication or feedback from industry, raises more concerns,” the senators wrote.
“As members of the Senate Committee on Banking, Housing, and Urban Affairs, we urge you to retract your agencies’ irresponsible joint statement and instead endorse risk-based lending practices that promote safety and soundness in the bank sector,” they concluded the letter.
Joining Vance on the letter is every Republican member of the Senate Banking Committee: Ranking Member Tim Scott of South Carolina, Senators Mike Crapo of Idaho, Michael Rounds of South Dakota, Thom Tillis of North Carolina, John Kennedy of Louisiana, Bill Hagerty of Tennessee, Cynthia Lummis of Wyoming, Katie Britt of Alabama, Kevin Cramer of North Dakota, and Steve Daines of Montana.