Loan Denied to Illegal Alien - Follow-up Question

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Question:

In the Guru Q&As Compliance Section of the Weekly Banker Briefing dated 3/25/2007, a question under the topic of <a href="http://www.bankersonline.com/compliance/guru2007/gurus_comp032607c.html">"Loan Denied to Illegal Alien-Adverse Action?"</a> piqued my curiosity. I agree with the gurus' assertion that an ECOA AAN is required and as credit is never pulled, obviously, FCRA is not a factor. I do, however, question the following: <ol><li>Isn't the OSC [202.6(b)(7)(1)] referring to resident and non-resident alien status, not ILLEGAL status? <li>If the FI is denying ALL ILLEGAL applicants, how does that have any bearing on National Origin? (Yes, I know, "ALL" is a huge word)</ol>Also, I'd make a call to ICE upon learning of the illegal status.

Answer:

202.6(b)(7)(1) refers to the immigration status of the "alien." Taking into account the applicant's citizenship or non- citizenship is given as an example and not as all inclusive. From the Commentary: "The applicant's immigration status and ties to the community (such as employment and continued residence in the area) could have a bearing on a creditor's ability to obtain repayment. Accordingly, the creditor may consider immigration status and differentiate, for example, between a non-citizen who is a long-time resident with permanent resident status and a non-citizen who is temporarily in this country on a student visa."
There will always be that one "exception"; therefore it is very unlikely that all applicants will be denied, or it is possible that the FI only checks the immigration status of those that appear to be from Mexico, as an example. So the policy does have to be designed and implemented in a manner to avoid the possibility of implied discrimination based on national origin.

First published on BankersOnline.com 5/21/07