Posts tagged ‘DACA’

Can Your Member’s Immigration Status Be Considered When They Apply for a Loan?

A married couple comes into your credit union to apply for a car loan.  The spouses, in their late 20s, have excellent credit but one of them is not a permanent U.S. resident.  Instead, one spouse is allowed to live and work legally in the U.S. under the Deferred Action for Childhood Arrivals (DACA) program, a program begun under the Obama Administration, under which children who came to this country illegally are allowed to remain indefinitely and obtain the documentation they need including obtaining valid Social Security numbers.  The credit union informs the couple that the citizen spouse must apply individually.  Since the DACA spouse is not a permanent resident of the U.S., she is not qualified to apply for a car loan under the credit union’s policy.

These facts are very similar to those in a lawsuit recently filed against Alliant Credit Union in federal district court in California alleging that the credit union engaged in illegal discrimination under federal law.  The case is by no means unique to this credit union.  There are currently several cases pending in the Ninth Circuit, which covers the West Coast, in which the rights of lenders must be squared with federal law, which generally bans discrimination, including Ruben Juarez, et al. v. Social Finance, Inc., et al.; Perez v. Wells Fargo Bank, N.A.; Garcia v. Harborstone Credit Union just to name a few.  These cases demonstrate that all credit unions should understand their policies related to loans to members whose immigration status may be in doubt. 

From a compliance standpoint, the credit union would seem to be on solid legal ground.  While Regulation B prohibits lenders from inquiring about a borrower’s race, creed or national origin, the same Regulation provides an exception for inquiries about an applicant’s immigration status.  Specifically, it provides that:  “[a] creditor may inquire about the permanent residency and immigration status of an applicant or any other person in connection with a credit transaction.” [12 CFR § 202.5(e)]

However, this authority is not unlimited.  For example, should lenders be allowed to make a distinction between unsecured loans for which they may not be able to locate an individual force to leave the country and a secured loan for which the credit union will have adequate collateral?  And, is it possible that Regulation B should be struck down as illegal since it is arguably inconsistent with the federal Civil Rights Act, which bans discrimination on the basis of alienage?  These are all open questions that underscore that your policy considerations in this area should go well beyond the plain language of the Regulation. 

This is also an example of how our increasingly divided political discourse is framing our compliance considerations.  The DACA regulation was one of the most fiercely legally contested government acts during the Trump Administration and then, effectively, reinstated by Executive Action when President Biden took office.  In the absence of legislation, it is up to businesses and the courts to grapple with policy issues that used to be dealt with by Legislators. 

From a Compliance standpoint however, DACA is extremely helpful in ensuring that persons covered under the program will have adequate documentation to comply with a lender’s obligations to know their members under Regulation B.

April 6, 2022 at 9:15 am Leave a comment

HUD Clarifies that DACA Recipients Are Not Eligible For Loans from the Federal Housing Administration

Good Morning folks. In a June 11th letter to Representative Peter Aguilar, HUD officially confirmed what had been speculated about for months: It was actively implementing a policy of denying FHA eligibility for FHA loans to DACA recipients.

 As I explained in this blog, confusion has been mounting for months over what exactly HUD’s policy is regarding DACA recipients. Remember, the Trump Administration has ended the program but has not formally revoked the immigration status of DACA eligible individuals. In 2012, the Obama Administration created the “Deferred Action for Childhood Arrivals” program. Under the program, persons born outside of the United State who entered the country illegally before the age of 16 are entitled to “deferred action” stemming from their immigration status provided they follow certain rules. The program allowed these individuals to obtain documentation which allowed them to, among other things, take out loans. In 2017, the Trump Administration put an end to the program.

 As it noted in the letter, HUD’s action is technically not a change in HUD’s lending policy. The critics say this is only partially true. This memo from the House Financial Services Committee summarizing a hearing on barriers to minority homeownership argues that since at least 2018, HUD “may have made an informal change to interpret its own existing regulations to consistently deny loans to DACA recipients where as previously, some lenders had been able to originate loans for DACA recipients.” In the meantime, both Fannie and Freddie have felt the need to publicly state that they will still purchase loans given to DACA recipients.  

This goes in to the “don’t shoot the messenger” category. Regardless of where you stand on the immigration debate, from a compliance standpoint it is prudent for you to understand what your policies and procedures are with regard to the immigration documentation for persons seeking loans. Given our current political environment, you may have less and less flexibility to make your own decisions regarding the propriety of some of these loans. The more information you have ahead of time, the more prepared you will be.

 

June 25, 2019 at 9:11 am Leave a comment

How The Immigration Debate Is Impacting Your Credit Union

I’m seeing signs that the legal rights of DACA aliens seeking loans is bubbling to the forefront. It’s time for your credit union to grapple with this complicated and emotional issue if you haven’t done so already.

The first thing you’ll have to do is wade into the increasingly byzantine history of this program. In 2012, the Obama Administration, frustrated by its inability to reach an agreement on immigration reform with Congress, created the Deferred Action for Childhood Arrivals Program. Under the program, persons born outside of the United States and who entered the country illegally before the age of 16 were entitled to deferred action against prosecution for their status as illegal aliens. These Dreamers  were also given the right to obtain documentation which enabled them to legally work and obtain banking services. In 2017, the Trump Administration closed the program to new applicants. However lawsuits are pending, and the government is still required to accept new applicants for DACA status.

Regardless of what your personal view is of the program, if you’re in charge of overseeing lending criteria at your credit union, you should be aware of the unique issues raised by this program and the uncertain legal status of individuals who qualify for it. For example, in this blog I highlighted a lawsuit brought against Wells Fargo after it refused to give a student loan to a Dreamer. As I pointed out at the time, the ECOA makes it illegal to discriminate against someone based on their nationality but you can take someone’s immigration status into account when deciding whether or not to give them a loan.

The issue is once again coming to the forefront. Fannie Mae recently issued this guidance clarifying what documentation could be used for qualifying non US citizens for mortgage loans. It also used the guidance to reiterate that so long as a loan meets its purchase criteria at the time it is made, a subsequent change in the law or an individual’s immigration status will not trigger a repurchase demand. This is good news but it has the feel of one of those announcements by a team owner publicly declaring his support of the manager. If the manager’s job was really safe he wouldn’t feel the need to make the comment in the first place.

In contrast to the GSE, in a December 2018 update to its underwriting standards for providing mortgage insurance, Genworth explained that it would not provide mortgage insurance for homes purchased by Dreamers. In its notice it explained that, “the Deferred Action for Childhood Arrival (DACA), allows certain undocumented immigrants who entered the country as minors to receive a renewable two-year period of deferred action from deportation and eligibility for a work permit. The DACA Program does not provide proof of legal residency, therefore, DACA applicants are not eligible for Genworth Mortgage Insurance.”

All of this puts lenders in a damned if you do, damned if you don’t situation. This is especially true since many of the same issues related to mortgage loans exist for other types of loans. The bottom line is the worst thing you can do is ignore the issue completely and hope it goes away. I don’t know if you’ve noticed but the country is awfully divided and with an incredibly important Presidential election now less than two years away, neither party is going to be in a position to deal with the DACA issue once and for all.

March 28, 2019 at 9:47 am 1 comment

Four Things You Should Know To Start Your Credit Union Week

Kudos to our good friends at CUNA for joining in a petition seeking clarification from the FCC about when exactly the TCPA applies. Although I continue to get the sense that credit unions are not paying as much attention to this issue as they should, the general public is getting more annoyed by the growth unsolicited phone calls and now is no time to be in the dark about the circumstances under which your credit union may find itself on the receiving end of a class action lawsuit.

As I explained in this previous blog, the Telephone Consumer Protection Act (TCPA) applies to telephone equipment which has the capacity to store or produce telephone numbers to be called, using a random or sequential number generator; and to dial such numbers.” An amendment by the FCC extended this definition to include equipment which could be modified to do these tasks. Fortunately, a Federal court struck down the more expansive definition but now it’s time for the FCC to clarify once again what type of equipment triggers the TCPA.

Interest Rates Remain Steady Despite Record Low Unemployment

If your job is to anticipate how quickly interest rates are going to rise, you can be forgiven for being more than a little confused by recent economic trends. Friday’s announcement by the Department of Labor that the unemployment rate dipped below 4% means that it is at levels not seen since the days of the .com bubble and moving into territory that would have made Eisenhower proud. At the same time, we aren’t seeing a surge in wage growth. While this is good news for those of you guarding against interest rate spikes, it certainly has economists scratching their heads. Here’s the heading of a research note from Fullerton Markets this morning: Data shows slacks remain in US labor market despite drop in unemployment rate. Say what? There is slack in an economy with near record unemployment? We may not know what’s going on in the economy for decades to come, but this is further evidence that there are some fundamental shifts taking place that no one fully understands.

It’s Official, Senator Gillibrand Introduces Post Office Banking Bill

New York’s Senator, Kirsten Gillibrand officially unveiled legislation that would permit people to bank at their local post office. Perhaps now my local branch will start staying open at times when I can actually get to it. According to this article, services to be offered by the Post Office include small dollar savings and checking accounts and transactional services including debit cards. If you want to know what I think of the aspiring President’s proposal, here’s another blog for you.

DACA Issues Come To The Surface

With the continuing legal and political wrangling over the future of the Deferred Action for Childhood Arrivals program, my guess is that you will see more and more litigation dealing with claims of discrimination against individuals currently protected under the program who are in danger of losing their legal immigration status. The latest example I’ve seen is this lawsuit brought against Bank of America, by a job applicant who says he was denied his “dream job” because of his DACA status. I also checked this morning and a fascinating case alleging that Wells Fargo discriminated against DACA students by refusing to provide them student loans and/or credit cards is still being litigated.

 

May 7, 2018 at 9:08 am Leave a comment

DACA Debate Likely to Impact Lenders

President Trump’s announcement that he was ending the Delayed Action for Childhood Arrivals (DACA) in six months unless Congress passes legislation addressing the issue has important implications for lenders as individuals affected by the President’s announcement turn to the courts for protection.

The DACA program was instituted by President Obama in 2012. It allows qualified individuals who are illegal aliens who entered the country as minors to receive renewable two-year periods of deferred deportation. They are also eligible to receive work permits.

When I heard about the President’s announcement, I figured that now would be a good time to update you on the status of a case which has important potential implications for lenders. In Perez v. Wells Fargo & Co., Case No.: 17-cv-00454-MMC, DACA recipients are suing Wells Fargo claiming that the bank’s lending policies violate federal civil rights law. Each of the highlighted plaintiffs applied to the bank for a loan. Nonetheless, they argue that they were denied loans ranging from student loan applications to a loan for commercial equipment. Each claims that they have a U.S. citizen as a willing co-signer but that the bank categorically refused their applications.

Here’s why I think the case is potentially so significant: In its motion to dismiss, Wells Fargo argued correctly that under the Equal Credit Opportunity Act (ECOA), it is not prohibited from discriminating against the person on the basis of alienage. In other words, the ECOA prohibits discrimination against someone because they are Hispanic but does not prohibit basing a lending decision on a Hispanic person’s immigration status. Conversely, the plaintiffs in this case argued that the ECOA should be interpreted in conjunction with 42 U.S.C. § 1981. “42 U.S.C. § 1981, which provides, in relevant part, that “[a]ll persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts . . . as is enjoyed by white citizens.” This federal law has been interpreted to not only prohibit racial discrimination but discrimination on the basis of immigration status.

On August 3rd, the court sided with the plaintiffs. It ruled that § 1981 could be read as complementing the ECOA rather than conflicting with it. Specifically, the court concluded that it is appropriate to interpret federal law as barring not only discrimination in lending decisions under the ECOA but also discrimination against persons on the basis of their immigration status under § 1981. This expansive ruling, if upheld on appeal – and I’m assuming there will be an appeal – represents an extremely significant expansion of lending anti-discrimination law.

Cordray For Governor?

Strike up the Pretender’s music: It looks like CFPB Director, Richard Cordray is going back to Ohio.

On Monday, he did nothing to quiet down speculation that he is going to run for Governor of Ohio when he quits his job as the head of the CFPB. He gave a speech in Cincinnati to a gathering of the AFLCIO in which sounded an awful lot like a populist campaign speech. For example, in his speech he stated that “We need to be able to see that wherever we start in life, we can advance through our own merit and hard work. We need a marketplace, and a justice system, and other key pieces of our society to operate more effectively and truly reflect the principle that every one of us counts” This sounds a lot more exciting than talk about overdraft fees.

September 6, 2017 at 8:53 am Leave a comment

Is it illegal to deny student loans to DACA students?

perez

Is it a violation of federal law to deny someone a student loan based on their status as a Dreamer? That is the central question posed by a class action lawsuit brought by California college  students who claim that Wells Fargo denied them student loans in violation of both, Federal and California Law. The lawsuit has the potential of putting financial institutions front- and- center in the debate over the protections the country affords to immigrants.

In June 2012, President Obama’s Department of Homeland Security announced that it would no longer deport young immigrants who had lived in this country for most of their lives, but whose parents were here illegally, and who themselves had never obtained legal status. Under the Deferred Action for Childhood Arrivals (DACA), eligible individuals receive a renewable two year authorization granted by the federal government to stay in the country. Eligible individuals receive a work permit and obtain employment authorization documentation, which entitles them to legally look for work.

The lawsuit was brought by Mitzie Perez, she claims that in August of 2016 she applied for a student loan online. While completing the application she indicated that she was neither a US citizen or a permanent resident. She was immediately denied the loan. Curious as to why she was denied, when she completed the same application a second time, she indicated she was a permanent resident, she was told that “based on the citizenship status you provided, a US Citizen Co-signer will be required for this application”. Should would be able to obtain a co-signer.

She claims the bank violated 42USCA Section 1981. This law provides that “All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens…” She also argues that because of the documentation she is able to provide the bank under DACA, Wells Fargo can provide her a loan without violating the Customer Identification Procedure requirements of the Bank Secrecy Act.

Leaving aside the emotional pull of the argument, the responsibility of financial institutions towards persons who are not permanent legal aliens is ambiguous. Regulation B, which implements the Equal Credit Opportunity Act, makes it illegal to discriminate against an applicant on a prohibited bases, including the applicants’ national origin. Here is where it gets tricky; the commentary accompanying this prohibition explains that while “A creditor may not refuse to grant credit because an applicant comes from a particular country.” A financial institution “may take the applicant’s immigration status into account. A creditor may also take into account any applicable law, regulation, or executive order restricting dealings with citizens (or the government) of a particular country or imposing limitations regarding credit extended for their use.” (12 C.F.R. § Pt. 1002, Supp. I).

Wells Fargo is in a tough spot. On the one hand, I agree with those who argue that there is something distinctly un-American about throwing DACA individuals out of the country. Many of them have spent almost their entire lives growing up as Americans. That being said, the law is the law and just as President Obama extended legal protections with an Executive order in 2012, President Trump could eliminate their legal status with the stroke of a pen. Financial institutions not only have the right but the legal obligation to consider this possibility when deciding whether or not to extend loans to students like Ms. Perez. What decisions they should make based on this information is a much tougher call. This case underscores why congress needs to craft common sense immigration reform.

February 2, 2017 at 9:25 am 2 comments


Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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