US bank regulators issue warning on lending to illegal workers

Investing.com -- Three U.S. bank regulators issued guidance on Monday advising financial institutions to exercise caution when lending to individuals not legally authorized to work in the country.

The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Association released the guidance, stating that borrowers whose income comes from unauthorized employment may present higher credit risks.

The regulators noted that repayment could be less reliable due to potential loss of employment related to nonlegal status, inability to obtain legal employment, or removal from the United States.

The guidance is nonbinding and does not create new requirements for banks. It serves as a reminder of existing obligations and aims to implement an executive order signed by President Donald Trump in May.

Trump's executive order addressed the potential misuse of financial services by people living in the U.S. illegally. The order directed the Treasury Department and other agencies to identify potential warning signs for the industry.

The banking industry had previously been concerned about a stricter approach that would have required banks to collect citizenship data on accountholders. The May executive order took a less stringent approach than that option.

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