ARLINGTON, Va.—What are the potential fair lending implications of considering immigration status when evaluating student loan applications?
NAFCU Regulatory Compliance Specialist Alma Calcano explained that under the Equal Credit Opportunity Act (ECOA), implemented by Regulation B, discrimination based on any prohibited basis (race, color, religion, national origin, sex, marital status, age, etc.) is generally illegal.
"However, the regulation permits credit unions to inquire about and consider immigration status or status as a permanent resident of the United States, in evaluating credit applications if it will affect the credit union's ability to collect on the loan," she said.
"The rationale behind this is that an applicant's ability to repay a debt may be affected by his immigration status and ties to the community," added Calcano. "It is important to clarify that, even though the rule permits credit unions to consider immigration status, it prohibits credit unions from basing credit decisions on where an applicant is from (national origin)."
Calcano said certain cases of rate reductions and loan denials determined by immigration status could violate these regulations, pointing to NCUA's Fair Lending Guide and a previous NAFCU Compliance Monitor article on ECOA and the Fair Housing Act as resources on fair lending.