Breaking Down Tim Scott’s Claim That The Biden Administration Directed Banks To Ignore Borrowers’ Immigration Status

Christine Sellers | Fact Check Reporter

In a Nov. 2 post shared on X, former 2024 presidential hopeful and South Carolina Republican Sen. Tim Scott claimed the Biden administration is purportedly directing banks to ignore the immigration status of borrowers.

Scott and the Banking Committee sent a letter to the Consumer Financial Protection Bureau (CFPB) and the U.S. Department of Justice (DOJ) about a recent statements made both agencies regarding banking lenders and prospective borrowers immigration status.

“Instead of preventing illegal immigration, the Biden administration is encouraging it by directing banks to ignore the immigration status of borrowers. Today, I joined @JDVance1 & my @BankingGOP colleagues in demanding the administration retract this dangerous guidance,” Scott said in the X post while sharing the letter.

The CFPB and the DOJ recently released a joint statement on fair lending practices for borrowers who are not citizens under the Equal Credit Opportunity Act (ECOA). According to the statement, while ECOA does not prohibit lenders from considering a borrower’s immigration status, the act also prohibits discrimination based on the borrower’s immigration status. In addition, the statement warns that overbroad reliance on immigration status, particularly when it is rooted in bias, violates ECOA and other laws.

Both the CFPB and the DOJ issued respective press releases reiterating that a borrower’s immigration status cannot be used for discriminatory purposes during the credit decision-making process.

“Lenders should not deny people the opportunity to take out a loan to buy a home, build their businesses or otherwise pursue their financial goals because of unlawful bias and without regard to their actual ability to repay,” Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said. “This guidance reminds lenders that denying someone access to credit based solely on their actual or perceived immigrant status may violate federal law,” Clarke added.

Scott and his Republican colleagues, Sens. J.D. Vance (Ohio), Mike Crapo (Idaho), M. Michael Rounds (South Dakota), Thom Tillis (North Carolina), John Kennedy (Louisiana), Bill Hagerty (Tennessee), Cynthia Lummis (Wyoming), Katie Boyd Britt (Alabama), Steve Daines (Montana), and Kevin Cramer (North Dakota) signed a letter addressed to both agencies following their joint statement.

In the letter, the group, which comprises the Senate Banking Committee, expressed their concerns that the agencies’ 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.”

Investopedia said in an April 2023 article focused on banking rights for immigrants that banks are not supposed to ask borrowers about their immigration status when it comes to opening bank accounts. In addition, the article explains illegal immigrants can open a bank account with a legal form of ID, such as a passport, as well as a social security number (SSN) or individual taxpayer identification number (ITIN). The article also outlines the process of obtaining an ITIN.

“However, creditors like banks may consider immigration status and whether you have the right to stay in the country long enough to repay any potential debt when making their credit decisions,” reads the Investopedia article.

The CFPB also interprets Regulation B that when it comes to credit applications, creditors can note that an “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 noncitizen who is a long-time resident with permanent resident status and a noncitizen who is temporarily in this country on a student visa.”

In a February 2022 article, Boundless states non-citizens who do not already have a green card must pass either a green card test or a substantial presence test in order to open a bank account. (RELATED: Did Joe Biden Convince Benjamin Netanyahu To Call For A Cease-Fire To Get Hostages Out Of Gaza?)

In 2017, immigrants who were denied credit by Wells Fargo Bank based on their immigration status were able to sue following a ruling from a federal judge in San Francisco, Reuters reported.

A spokesperson for Scott, the Senate Banking Committee Ranking Member, said to Check Your Fact that the CFPB and DOJ’s statement made it “clear that it is intended to pressure banks.”

“As stated in the letter, on October 12 the Department of Justice (DOJ) and the Consumer Financial Protection Bureau (CFPB), under the Biden administration, released a joint statement warning financial institutions that the consideration of immigration status in loan applications may be a violation of the Equal Credit Opportunity Act (‘ECOA’),” the spokesperson said.

“The executive branch’s directive for banks to not rely on a borrowers’ immigration status poses serious risks to financial stability and goes against sound lending practices. Further, one of the administration’s agencies asserting this guidance is one of the direct supervisory bodies over the private sector entities at which the directive is aimed – making it clear that it is intended to pressure banks. This new DOJ/CFPB directive is another signal from the Biden administration that entering our country illegally will be met without consequence, encouraging additional illegal immigration at a time of record-highs,” the spokesperson continued.

Some experts supported Scott’s claim.

Andrew Arthur, a resident fellow at the Center for Immigration Studies –which advocates for lower immigration levels– told Check Your Fact the “statement, in essence, told banks to ignore immigration status.”

“It created unnecessary confusion and I don’t disagree with what Scott and Vance said in their letter,” Arthur said. He also directed Check Your Fact to an article he wrote about the CFPB/DOJ statement.

“Lending money is all about risk, not just the risk that lenders won’t get their money back, but in this context that some combination of a lavishly funded independent agency and the world’s largest law firm are going to sue you into non-existence. That joint statement is both so scary and so vague, most lenders would be forgiven for assuming that even patently illegal alienage can’t be considered at all,” Arthur wrote.

John Shu, a legal and administrative expert who served in the Bush administrations, told Check Your Fact in an email that it “seems that the CFPB’s and the DOJ’s joint statement of October 18, 2023 is a ‘warning shot’ of sorts to warn lenders to think twice before denying loans or other forms of credit to those who are undocumented or illegally in the U.S., based solely on their respective immigration status.”

“The November 1, 2023 letter from the Republican members of the Senate Committee on Banking, Housing, and Urban Affairs to the CFPB and the DOJ is not an unreasonable one. First, the 1974 Equal Credit Opportunity Act permits lenders to deny loans or credit to someone who is undocumented or illegal, but the reason has to be more holistic and not based solely on his immigration status.  For example, national origin and immigration are different things with different legal meanings,” Shu said.

“Second, illegal immigration almost always brings up national security concerns, even in the financial sector, such as moving or laundering money.  Third, the whole point of Dodd-Frank and creating the CFPB was to improve financial stability, particularly in the banking system, so that lending to those who could not afford to pay back the loans (e.g., subprime mortgages) and causing another crash like 2008-09 never happens again.  However, the joint statement seems to hint against prudent risk management in the context of lending to undocumented and/or illegal aliens,” Shu added.

“The Equal Credit Opportunity Act, the law the Biden administration’s statement cites, protects borrowers from discrimination based on race or national origin. An applicant’s immigration status can be considered ‘to ascertain the creditor’s rights and remedies regarding repayment.’ Of course, the statement doesn’t explicitly direct creditors to ignore immigration status, but it makes clear that the DOJ and CFPB could view consideration of immigration status in broadly painted scenarios set forth in the statement as discrimination prohibited by the ECOA. It seems like vague guidance that would make creditors hesitant to consider applicants’ immigration status,” Kuckelman said.

The Independent Community Bankers of America (ICBA) put out an Oct. 13 statement stating they have “concerns about the joint statement, which appears to contradict decades of practice, direction from banking regulators, and official guidelines under federal lending programs that require permanent residency or U.S citizenship to qualify. ICBA will be working with the CFPB and DOJ to procure further clarification regarding compliance with Regulation B.”

Other experts told Check Your Fact that the DOJ/CFPB statement does not encourage lending to illegal immigrants.

Alexandra Thornton, senior director of financial regulation at the liberal think tank Center for American Progress, told Check Your Fact that the “statement does not encourage banks to ignore the immigration status of borrowers.”

“Vance’s characterization of the administration’s action is incorrect. It appears to be based on this joint statement issued by the Department of Justice and Consumer Financial Protection Bureau on October 12, but that statement does not encourage banks to ignore the immigration status of borrowers. Rather, it says that unnecessary and overbroad reliance on immigration status, including when based on bias, may violate the antidiscrimination provisions of the Congressionally-mandated Equal Credit Opportunity Act,” Thornton said.

Norbert Michel, the vice president and director of the Center for Monetary and Financial Alternatives at the Cato Institute –a libertarian think tank– said the “joint CFPB/DOJ statement does not demand that banks help fund anything.”

“The joint CFPB/DOJ statement does not demand that banks help fund anything. Nor does it encourage banks to lend to illegal immigrants. The statement is correct to point out that ECOA prohibits discrimination by creditors based on multiple factors, including national origin. If the Senators do not like ECOA – a sensible position given how broad it is – they should propose a new law. That’s what the Senate is supposed to do,” Michel told Check Your Fact via email.

Similarly, Dr. Tom K. Wong, an immigration expert from the University of California San Diego who also worked in the Obama administration, said in an email to Check Your Fact that he was not aware of any data supporting Scott’s claim.

“The statement made by Sen. Tim Scott sensationalizes the [DOJ/CFPB] statement. There is no data that I am aware of that supports Scott’s statement that this is ‘dangerous guidance,'” Wong said.

Under the Biden administration, the U.S. experienced a yearly high in illegal immigration, with more than 2 million illegal migrant apprehensions in FY 2023, according to CBS News. Data from the Customs and Border Patrol (CBP) shows that there were 2.475 million enforcement encounters on the southern border in FY 2023.

House Republicans on the Homeland Security Committee also released a report, citing CIS figures, which found “that the annual cost just to care for and house the known gotaways and illegal aliens who have been released into the country under Mayorkas’ leadership could cost as much as an astounding $451 billion.”

Check Your Fact has also contacted the White House, DOJ and the CFPB for comment and will update this piece accordingly if responses are provided.

Update 11/14/2023: This article was updated with more information about creditors and immigration status. It is also to clarify that the Investopedia article was about banks asking immigration status when it comes to opening a bank account. 

Update 11/14/2023: This article was updated with an Oct. 13 statement put out by the ICBA. 

Update 11/16/2023: This article was updated with responses from legal expert John Shu, CIS resident fellow Andrew Arthur and Heritage Foundation research associate Matthew Kuckelman. It also rearranged responses from Scott’s office and experts. It includes more information about illegal immigration that has occurred during the Biden administration. 

Elias Atienza contributed to this report. 

Christine Sellers

Fact Check Reporter