WASHINGTON (AP) — President Donald Trump signed an executive order on Tuesday requiring banks to more carefully scrutinize customers’ citizenship status, a new step in his administration’s crackdown on people living in the country illegally.
The order directs bank regulators and government agencies to look for signs that people without legal status have opened accounts or obtained loans or credit cards. However, the order is less aggressive than the banks expected, as previous reports suggested the White House was drafting an order to force the collection of customers’ citizen information.
In the order, the White House determined that banks would face credit risks if one of their customers was deported and could no longer repay any loans. The White House said it would not “create risks to our financial system by allowing the provision of credit or financial services to aliens who are inadmissible and deportable.”
Because banks never collect any information about their customers’ citizenship or immigration status, there is no reliable public data on how much of a risk these customers pose to the financial system.
A study by the left-leaning Urban Institute estimated that 5,000 to 6,000 mortgages were issued to customers with Individual Taxpayer Identification Numbers (ITINs). These ITINs are often used by undocumented workers in place of Social Security numbers. The Urban Institute estimates that banks are very reluctant to lend to individuals with ITINs. Fannie Mae and Freddie Mac are also generally unwilling to provide mortgage insurance to borrowers with ITINs, making ITIN holders less likely to obtain a mortgage.
The White House has been signaling for weeks that it was planning some kind of executive order covering how banks handle undocumented customers. Finance Minister Scott Bessant said last month there “should be stricter rules” for opening bank accounts.
“Why can unknown foreigners come and open a bank account?” Bessant said.
He claimed that bank executives should “know your customers.” “So if you don’t know whether your customers are legal or illegal, whether they are U.S. citizens or green card holders, how do you know them?”
In response, the banking industry has been lobbying aggressively for months to prevent the White House from issuing an executive order mandating the collection of customers’ citizenship status, saying the move would be costly and require extensive paperwork. Because the order only provides banks with guidance, not authority, the banks appear to be able to win over the White House.
Immigration advocates have previously said any order requiring banks to collect citizens’ information could lead to undocumented immigrants exiting the financial system, increasing the number of “unbanked” individuals.
The White House has taken other steps to prevent undocumented workers from using the financial system. The Treasury Department announced in November that it would reclassify certain refundable tax credits as “federal public benefits,” barring some immigrant taxpayers from receiving them even if they file and pay taxes and meet other qualifications.
Tax experts say immigrants brought to the U.S. illegally as children by their parents, known as Deferred Action for Childhood Arrivals (DACA), beneficiaries and immigrants with temporary protected status will be largely affected by the planned changes.
