President Donald Trump signed an executive order requiring banks to examine their customers’ citizenship more closely. This new move is part of his administration’s effort to toughen actions against those living in the country without authorization. The order calls for banking regulators and government departments to look for signs of people without legal status opening accounts or obtaining loans or credit cards. However, it is less aggressive than banks expected. Previous reports suggested the White House was drafting an order that would mandate collecting customers’ citizenship information.
The order outlines that banks could face credit risks if one of their customers is deported and unable to repay a loan. The White House stated it would not “allow risks to our financial system from extending credit or financial services to inadmissible aliens subject to deportation.” Banks have never collected information on citizenship or immigration status, so there are no reliable public figures on the risk these customers pose to the financial system.
A study by the Urban Institute, a left-leaning think tank, estimated between 5,000 and 6,000 mortgages were issued to customers with Individual Taxpayer Identification Numbers (ITINs). ITINs are often used by undocumented workers instead of a Social Security Number. The institute found banks were very reluctant to lend to people with ITINs. Fannie Mae and Freddie Mac, major mortgage companies, also tend to avoid insuring mortgages for borrowers with ITINs, making it even less likely for such document holders to obtain a mortgage.
The White House had signaled the plan for an executive order related to how banks deal with clients without legal authorization for several weeks. Treasury Secretary Scott Bessent stated last month that there should be “stricter rules” for opening bank accounts. He questioned, “Why can foreigners of unknown nationality come in and open a bank account?” Bessent emphasized that bank executives were supposed to “know their customers,” asking, “How do you know your client if you don’t know whether they are legal or illegal, a U.S. citizen, or a green card holder?”
The banking industry had been aggressively lobbying for months to prevent the White House from issuing an executive order that would have made collecting customers’ citizenship status mandatory. They argued it would be costly and require a massive amount of paperwork. Since the order only offers a recommendation without obligation, it appears the banks managed to persuade the White House. Immigrant rights advocates have previously said any order mandating banks to collect citizenship information would likely result in undocumented immigrants leaving the financial system.
The White House has taken other steps to discourage undocumented workers from using the financial system. The Treasury Department announced last November that it would reclassify certain refundable tax credits as “federal public benefits,” which prevents some immigrant taxpayers from receiving them, even if they file taxes and meet other requirements.
Tax experts noted that immigrants brought to the U.S. illegally as children, known as DACA recipients, and immigrants with Temporary Protected Status would be significantly affected by the proposed change.