Three federal banking regulators on Monday told banks and credit unions to weigh whether borrowers who lack legal authorization to work in the United States can reliably repay their loans, warning that such lending “may present elevated credit risk.”

The joint guidance from the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corp. (FDIC) and the National Credit Union Administration (NCUA) was issued under Executive Order 14406, “Restoring Integrity to America’s Financial System,” signed by President Donald Trump on May 19, which directed regulators to address “risks to the financial system posed by the extension of credit or financial services to the inadmissible and removable population.” 

The order requires banks and other financial institutions to take a closer look at the citizenship of their customers and directed regulators and government departments to look for signs that people without legal status are opening accounts or obtaining loans or credit cards.

Monday’s guidance is the latest in a series of administration measures over roughly the past nine months aimed at discouraging people in the U.S. illegally from using the banking system. The agencies framed the document as a reminder of existing supervisory expectations rather than new rules, and it does not prohibit lending to the affected borrowers. 

Income earned from unauthorized employment may be a less reliable source of repayment, the agencies said, citing the possibility of job loss when work authorization is lacking or expires, difficulty finding lawful reemployment, and removal from the United States. Lenders should consider whether a borrower’s repayment capacity would hold up under scenarios that include interruptions in employment or income, the guidance said.

Regulators also flagged collateral challenges, saying institutions may find it harder to contact non-work-authorized borrowers or to locate and repossess movable collateral such as automobiles, recreational vehicles and boats. On documentation, the guidance said institutions might consider requiring paystubs, W-2s, tax returns, employer verifications, bank statements or evidence of continuing work authorization, and may weigh whether such loans show signs of credit weakness, regardless of delinquency status, for loan classification and credit-loss allowances.

Financial institutions with lending concentrated in geographic markets, employers or industries disproportionately exposed to changes in immigration enforcement or labor availability could face “correlated credit deterioration within affected segments of the portfolio rather than isolated borrower-level stress,” the agencies said.

The guidance also directs institutions to the Consumer Financial Protection Bureau’s June 8 “Statement on Ability To Repay and Immigration Status.” In that statement, the CFPB said creditors relying on income from U.S.-based employment are “permitted — and may, under certain facts and circumstances, be obligated” to consider information bearing on a consumer’s continuing ability to earn income when U.S. residency is a necessary component of the job. 

The guidance builds on earlier moves under the executive order. In May, the Treasury Department’s Financial Crimes Enforcement Network issued an advisory telling banks to watch for identity theft, payroll tax fraud and money-laundering schemes tied to the hiring of people not authorized to work in the U.S., listing more than a dozen red flags that could indicate an individual is in the country illegally.