The Office of the Comptroller of the Currency (OCC), Federal Deposit Insurance Corporation (FDIC), and National Credit Union Administration (NCUA) issued new interagency guidance directing financial institutions to treat lending to individuals not legally authorized to work in the United States as presenting elevated credit risk. The guidance instructs banks to evaluate whether a borrower’s employment authorization could affect the stability of income and repayment capacity and to consider the potential impact on collateral recovery. The guidance also warns that “financial institutions with significant lending exposure to borrowers concentrated in specific geographic markets, employers, or industries that may be disproportionately affected by changes in immigration enforcement, employment verification practices, labor availability, or workforce disruptions may face elevated concentration risk.”
The guidance follows the Financial Crimes Enforcement Network’s (FinCEN) June advisory directing financial institutions to identify suspicious activity that SWACCA has pressed financial regulators on for years that is associated with labor brokers, payroll fraud, shell companies, and the unlawful employment of unauthorized workers. SWACCA highlighted the new FinCEN guidance in its recent comments opposing the Department of Labor’s proposed Joint Employer rule, which explained how labor broker arrangements facilitate worker misclassification, payroll tax evasion, wage theft, and unfair competition while making it more difficult to hold responsible parties accountable.