President Donald Trump signed an executive order on Tuesday requiring banks to scrutinize the citizenship status of their customers. This step is part of the administration’s efforts to crack down on individuals living in the country without proper authorization.
The order mandates that banking regulators and government departments look for signs of undocumented individuals opening accounts or obtaining loans or credit cards. However, this measure is less stringent than banks anticipated. Previous reports suggested the White House was crafting an order that would make collecting citizenship information from clients mandatory.
The White House claims banks could face credit risks if a customer is deported and unable to repay a loan. The administration stated it will not allow financial risks stemming from extending credit or financial services to inadmissible foreign nationals subject to deportation.
Since banks have never collected information on the citizenship or immigration status of their clients, there are no reliable public figures on the risk these clients pose to the financial system.
In a study by the left-leaning Urban Institute, it was estimated that between 5,000 and 6,000 mortgages were issued to customers using Individual Taxpayer Identification Numbers (ITINs). These numbers are frequently used by undocumented workers instead of Social Security numbers. The institute found banks were highly hesitant to lend to those with ITINs.
Major mortgage companies like Fannie Mae and Freddie Mac also typically refrain from backing mortgages for borrowers with ITINs, making it unlikely for holders of such documents to secure home loans.
The White House had hinted for weeks at plans for an executive order on how banks handle customers without legal authorization in the country. Last month, Treasury Secretary Scott Bessent declared that there should be stricter rules for opening bank accounts. He questioned why foreigners with unknown nationalities are allowed to open accounts, emphasizing that banks are supposed to “know their customers.”
The banking industry had lobbied aggressively for months to prevent a mandatory collection of citizenship status. The banks argued such a requirement would be costly and involve excessive paperwork. Since the order only offers a recommendation without imposing a mandate, it seems banks managed to persuade the White House.
Immigrant rights advocates previously stated that any mandate forcing banks to collect citizenship information could drive undocumented immigrants out of the financial system.
The White House has taken other steps to deter unauthorized workers from engaging with the financial system. The Treasury Department announced last November it would reclassify certain refundable tax credits as “federal public benefits.” This change prevents some immigrant taxpayers from accessing them, even if they file returns, pay taxes, and meet other criteria.
Tax experts highlighted that immigrants brought to the U.S. illegally as children — known as DACA recipients — and those with Temporary Protected Status would be significantly impacted by the proposed change.
Leave a Reply