CFPB guidance on ability to repay, immigration status, and fair lending creates a difficult compliance dilemma for creditors.

The CFPB’s June 5, 2026 statement on “Ability to Repay and Immigration Status” presents creditors with a difficult, and potentially unprecedented, compliance dilemma. The Bureau says that when creditors are required to assess a consumer’s ability to repay, they may, and in some circumstances may be required to, consider information about the consumer’s immigration status if that information bears on the consumer’s current or reasonably expected future income.

But how can creditors take immigration status into account without violating federal or state fair-lending laws that prohibit discrimination based on national origin?

That was the central question explored in the latest episode of the Consumer Finance Monitor Podcast, released today. Our host, Alan Kaplinsky (founder, leader for 25 years and now Senior Counsel of our Consumer Financial Services Group) was joined by three Ballard Spahr lawyers with complementary expertise: Dustin O’Quinn, a nationally recognized immigration lawyer; Richard Andreano, leader of the firm’s Mortgage Banking Group and a leading authority on mortgage lending regulation; and John Culhane, a longtime member of Ballard Spahr’s Consumer Financial Services Group.

The discussion demonstrates just how difficult the CFPB’s guidance may be for creditors to operationalize.

What exactly did the CFPB say?

The CFPB’s guidance focuses principally on the ability-to-repay requirements applicable to credit cards and residential mortgage loans. For credit cards, the requirements arise under Section 150 of the Truth in Lending Act and Regulation Z § 1026.51. Credit card issuers must maintain reasonable policies and procedures to assess an applicant’s or cardholder’s ability to make the required minimum payments.

For residential mortgages, the ability-to-repay requirements were added to the Truth in Lending Act by the Dodd-Frank Act following the 2008 mortgage crisis. The general ability-to-repay rule requires creditors to consider a number of factors, including the consumer’s current or reasonably expected income and assets and the consumer’s debt-to-income ratio. Qualified Mortgage rules provide an alternative compliance framework that is widely used by mortgage lenders.

The CFPB’s concern is relatively straightforward: If a consumer’s immigration status creates a meaningful possibility that the consumer will lose the ability to remain in the United States or to work here, that possibility could affect the consumer’s future income and, consequently, the consumer’s ability to repay a loan.

As Rich Andreano explained during the podcast, this issue is particularly significant for mortgages because they are generally long-term obligations. A lender making a 30-year mortgage may need to consider whether employment and income are reasonably likely to continue over the life of the obligation.

But that seemingly straightforward proposition becomes much more complicated when immigration status enters the underwriting process.

Credit cards and mortgages are different

John Culhane explained that the credit card ability-to-repay requirement is fundamentally a point-in-time assessment. A card issuer must consider the applicant’s independent income or assets and current obligations, but generally does not have to make predictions about whether the consumer’s income will continue.

Mortgage underwriting is different. The mortgage rules expressly require consideration of current or reasonably expected income, and when income from employment is being relied upon, the creditor must consider the employment and the likelihood that it will continue.

That distinction matters enormously in the immigration context.

A credit card issuer generally has not been required to investigate whether an applicant’s employment will continue unless there is some significant red flag. A mortgage lender, by contrast, already has a regulatory obligation to consider the likelihood that income will continue.

Immigration status is anything but binary

One of the most important points made during the podcast was that creditors cannot sensibly divide applicants into two categories—those who are “legal” and those who are “illegal.”

As Dustin O’Quinn explained, immigration status encompasses a wide range of circumstances. A lawful permanent resident, for example, generally has a very stable immigration status and authorization to live and work in the United States. By contrast, nonimmigrant status encompasses more than 30 different visa categories, with dramatically different levels of stability.

A highly compensated H-1B professional who has worked in the United States for a decade and is pursuing permanent residence presents a very different risk profile from someone whose ability to remain in the country depends on a temporary humanitarian program whose future is uncertain.

There are also distinctions between valid immigration status, a period of authorized stay, and employment authorization. A person may be permitted to remain in the United States while waiting for an immigration application to be adjudicated, for example, and may have work authorization during that period.

As Dustin put it, immigration status is not binary. Nor is the question simply whether someone is authorized to work.

That creates an obvious practical problem for creditors whose underwriting personnel generally are not immigration lawyers.

The ITIN issue

The CFPB guidance also raises questions about lending to consumers who have an Individual Taxpayer Identification Number (ITIN) rather than a Social Security number.

An ITIN, however, does not necessarily mean that an individual is unlawfully present in the United States. It can simply mean that the individual is not eligible for a Social Security number.

Nevertheless, the guidance identifies the use of an ITIN as a potential red flag requiring additional diligence.

This could have significant consequences for lenders that offer ITIN-based mortgage, auto finance, or unsecured lending programs.

But Rich Andreano emphasized an important point: creditors should not automatically treat every ITIN holder as presenting the same risk. For example, a married couple in which one spouse is a U.S. citizen and the other has an ITIN presents a very different set of facts from many other circumstances.

The fair-lending problem

And this is where the CFPB’s guidance becomes particularly difficult.

During the prior administration, the CFPB and Department of Justice took the position that consideration of immigration status could raise concerns under the Equal Credit Opportunity Act (ECOA) particularly because of the statute’s prohibition against discrimination based on national origin.

The new guidance points creditors in the opposite direction by warning that immigration status may be relevant to ability to repay.

The CFPB, however, does not provide much guidance about how creditors are supposed to balance these competing considerations.

Rich Andreano described the problem succinctly: The guidance raises the risk associated with failing to consider immigration status but does not provide clear guideposts for considering immigration status without running afoul of ECOA and other civil-rights laws.

That leaves creditors attempting to “thread the needle” between two potentially conflicting regulatory expectations.

Simply lending only to citizens and permanent residents is not the answer

One possible reaction might be for a creditor to adopt a bright-line policy: lend only to U.S. citizens and lawful permanent residents.

We discussed that approach on the podcast, and the conclusion was that it is not a safe solution.

As John Culhane explained, Section 1981 of the Civil Rights Act provides that persons within the jurisdiction of the United States have the same right to make and enforce contracts as citizens of the United States. In addition, several states, including California, New York, and Washington, have laws prohibiting discrimination based on citizenship or immigration status.

Thus, a creditor that responds to the CFPB guidance by categorically refusing to lend to noncitizens or non-permanent residents could simply exchange one regulatory risk for another.

Rich Andreano also raised another important concern: A broad-brush policy can create significant class-action litigation risk. Moreover, ECOA has a five-year statute of limitations. As a result, policies adopted today could potentially be scrutinized under a future administration that takes a very different view of the relationship between immigration status and fair lending.

The banking agencies have entered the picture

The CFPB is not acting alone.

The podcast also examined guidance issued by the federal banking agencies addressing lending to individuals who are not legally authorized to work in the United States. The guidance from the Federal Reserve, FDIC, and OCC followed the Trump administration’s May 2026 Executive Order concerning the risks to the financial system associated with providing credit or financial services to individuals who may not be lawfully present in the United States.

That guidance extends beyond credit cards and mortgages. It addresses credit more broadly, including consumer credit and potentially small-business credit where the owner may not be lawfully present.

Among the subjects addressed are credit risk and underwriting, source of repayment, collateral considerations, documentation and verification, portfolio and concentration risk, and consumer compliance.

The result is a potentially much broader compliance issue for banks than the CFPB’s guidance standing alone would suggest.

A potential redlining problem?

The banking-agency guidance raises another interesting fair-lending issue.

John Culhane noted during the podcast that the guidance appears to contemplate consideration of the concentration of immigrants in particular geographic areas or industries as part of assessing portfolio risk.

That could create serious fair-lending questions. Drawing geographic boundaries based on the percentage of immigrants in a neighborhood could look very much like redlining. Similarly, excluding borrowers because they work in particular industries with significant immigrant populations could create disparate-treatment concerns.

This illustrates the fundamental problem with relying on broad demographic assumptions rather than individualized, objective underwriting factors.

What should creditors do?

The podcast participants agreed that simply ignoring the CFPB guidance is unlikely to be a satisfactory answer, particularly for banks subject to regular examination.

At the same time, adopting a categorical prohibition on lending to noncitizens or non-permanent residents presents substantial fair-lending and litigation risks.

The better approach is likely to involve a documented, risk-based and individualized assessment.

John Culhane suggested that creditors should carefully review their underwriting policies, particularly for credit cards and mortgages, and consider how to reduce the risks identified by the guidance while remaining mindful that the guidance itself does not have the force of law.

Rich Andreano emphasized the importance of documentation. In his view, creditors should conduct a risk assessment, document that assessment, develop written policies and procedures, monitor compliance, and evaluate the results for both safety-and-soundness and fair-lending concerns. He also suggested that banks may want to understand their examiners’ expectations concerning how the guidance should be addressed.

Dustin O’Quinn added that creditors should consider involving both consumer-finance compliance professionals and immigration counsel in developing or reviewing underwriting policies. With appropriate training and objective criteria, he believes the issue may be manageable without resorting to categorical exclusions.

A broader question about the CFPB’s regulatory philosophy

The guidance also raises a broader policy question.

The CFPB has stated that it intends to avoid issuing guidance unless necessary and that its guidance should reduce compliance burdens rather than increase them.

Yet this guidance appears to do precisely the opposite. It tells creditors that immigration status may be relevant to their ability-to-repay analysis but provides little practical direction concerning how creditors can make that assessment without creating fair-lending liability.

The podcast also explored what appears to be a tension between this approach and the administration’s broader policy against “debanking.” As John Culhane observed, it is difficult to reconcile a policy that discourages financial institutions from denying financial services for disfavored reasons with a policy that encourages creditors to consider immigration status as a potential credit risk.

Listen to the podcast

The CFPB’s immigration-status guidance sits at the intersection of ability-to-repay requirements, immigration law, fair lending, safety and soundness, and state law. It is therefore an unusually complicated issue that cannot be analyzed solely from a consumer-finance or immigration-law perspective.

Our latest Consumer Finance Monitor Podcast brings those disciplines together. Dustin O’Quinn, Richard Andreano, and John Culhane provide a detailed discussion of what the guidance means, the practical problems it creates for creditors, and how lenders should begin thinking about their policies and procedures.