Not legal advice. If someone has to sign their name to a credit decision, that someone is not the author of this blog. 😊.

This isn’t the first time we’ve talked about Executive Order 14406 and some of the resulting guidance. When we walked through FinCEN’s non work authorized populations advisory a few weeks ago, we told you the advisory was the opening act. The pieces with real operational teeth, i.e., the ones that could reshape how you underwrite, not just how you file SARs, were still backstage. Back then, we flagged one in particular: credit risk guidance from each federal regulator, NCUA included, due within 60 days of Executive Order 14406.

Right on schedule, it’s here. On July 13, 2026, the NCUA, FDIC, and OCC jointly issued the Interagency Guidance on Lending to Individuals Not Legally Authorized to Work in the United States. And for New York credit unions, it arrives with a complication the guidance itself never mentions because it’s a federal document that doesn’t account for New York’s Executive Law. Let’s fix that.

What the Guidance Actually Says

The guidance is short, and it’s careful to frame itself as a reminder of “existing obligations” rather than a new rule. But read past the throat clearing and it’s asking for something specific: treat a borrower’s work authorization as a credit risk variable. It organizes the ask around five underwriting considerations.

• Source of repayment. Consider whether income tied to unauthorized employment is a reliable repayment source, and stress test repayment capacity against scenarios including the borrower’s loss of work authorization or removal from the United States. In other words, the guidance treats loss of work authorization or removal as a repayment scenario to be modeled, not a remote contingency.
• Collateral Considerations. Security interests may be harder to enforce, and unaffixed collateral like autos, RVs, and boats is harder to locate and repossess, if a borrower is removed.
• Documentation and verification. Consider paystubs, W-2s, tax returns, employer verifications, and “evidence of continuing work authorization.”
• Portfolio and concentration risk. The sleeper. Lenders concentrated in geographies, employers, or industries exposed to immigration enforcement may see correlated deterioration across a whole segment at once and the guidance invites classifying such loans or segments as weak for allowance purposes regardless of delinquency.
• Consumer compliance risk. It points to the CFPB’s June 8, 2026 Statement on Ability To Repay and Immigration Status and reminds everyone that the Equal Credit Opportunity Act and Regulation B, by their own terms, permits a creditor to take immigration status into account “to ascertain the creditor’s rights and remedies regarding repayment.”

Federally, then, consideration of immigration status and continuing work authorization isn’t just permitted: Regulation B allows it, and the CFPB’s June 8 statement signals that, in the ability-to-repay context, ignoring information bearing on repayment capacity can be its own compliance risk.

The New York Red Light

Ready for the New York complicator?

New York amended its Human Rights Law (Executive Law §§ 296 and 296-a) in December 2022 to add citizenship and immigration status to the list of protected characteristics, which now makes it unlawful to discriminate in granting, withholding, extending, renewing credit, or in fixing its rates, terms, or conditions, on the basis of citizenship or immigration status, right alongside race, national origin, and the rest. And it makes it unlawful even to use an application, record, or inquiry that expresses, “directly or indirectly,” any limitation or discrimination as to citizenship or immigration status.

Now line up the dates, because they’re almost too on the nose. On April 22, 2026, the CFPB published its Regulation B rewrite eliminating disparate impact liability under ECOA. On that same day the New York Department of Financial Services issued an industry letter on § 296-a reminding regulated entities that, under New York law, “covered credit decisions that result in a disparate impact may constitute an unlawful discriminatory practice.” One regulator closed the disparate impact door; the other, hours away, propped New York’s open and pointed at it.

And DFS wasn’t bluffing. The letter cites three of its own banking consent orders as reminders that it actually brings fair lending cases, and it notes that DFS is authorized both to enforce New York’s fair lending law and to penalize violations of federal fair lending law.

Where That Leaves New York Credit Unions

Put the two documents side-by-side and the tension is obvious. Federal guidance invites you to require evidence of continuing work authorization and to treat immigration status as a risk factor. New York law makes immigration status a protected class, restricts inquiries that single it out, and, unlike the CFPB and NCUA (for now) still recognizes disparate impact.

That last point is where the concentration risk reference becomes a trap. Suppose you respond to the federal guidance by tightening underwriting on borrowers in construction, agriculture, hospitality, domestic service, or staffing, or in a particular immigrant heavy geography. Facially, you’re managing concentration risk exactly as the agencies suggested. Under New York’s still live disparate impact standard, you may have just built a facially neutral policy that lands disproportionately on a protected class, the textbook setup for a § 296-a claim, and one the federal safe harbor won’t rescue you from in a state action.

Even before you get to preemption, there’s another unresolved issue. Regulation B expressly allows creditors to consider immigration status when doing so is necessary to ascertain their rights and remedies regarding repayment. We have not found a comparable exception in New York’s Executive Law § 296-a or the DFS guidance. Whether New York courts would recognize the same repayment related distinction remains an open question and is one that should be evaluated with counsel before changing underwriting practices.

And for federal charters, don’t assume preemption solves the problem. Fair lending is different from many other banking laws. NCUA’s lending preemption expressly leaves room for state credit discrimination laws, and ECOA preserves state laws that provide greater protection to applicants. Because New York’s Executive Law § 296-a is more protective, it continues to apply to both federal- and state-chartered credit unions. As a result, federal guidance permitting consideration of immigration status does not automatically displace New York’s fair lending restrictions. The practical difference between charters is largely who examines and enforces compliance, not whether the underlying New York statute applies.

Practical Next Steps

• Underwrite to documented repayment capacity, not solely immigration status. A decision grounded in verifiable, stable income is defensible anywhere; one that turns on status is exposed under § 296-a, and in New York, even the inquiry is restricted.
• Apply any work-authorization inquiry consistently across applicants, rather than selectively based on national origin, accent, or perceived ethnicity.
• Self-test before you tighten. Any new underwriting criterion tied to the named industries, geographies, or work authorization should get a disparate impact review before it goes live.
• Document the individualized decision. The credit file should show a documented, member specific, income based judgment, not a reflex toward either approval or denial.
• Don’t overcorrect. Declining or exiting members simply to avoid the question creates its own fair-lending and reputational exposure.
• Coordinate your BSA and lending policies. Our last article on SAR/EDD and this one on underwriting address the same members. Make sure the left hand and the right hand agree on how you treat ITIN and immigrant serving relationships.
• Watch the rulemakings. The CDD and CIP proposals EO 14406 set in motion are still coming, and they’re where account opening obligations will actually harden. The Association will flag them as they drop.

The Bottom Line

The federal guidance and New York law don’t just differ in emphasis; on immigration status they point in opposite directions, and they did it on the same day. When a federal permission and a state prohibition collide, the conservative path is the one that satisfies the stricter regime: income based, uniformly applied, individually documented underwriting that would survive a disparate impact review. Do that, and you’re likely compliant in both directions. Reach for the federal green light without checking your rearview mirrors, and New York is the car you don’t see coming.

Until Next Time

From the big picture to the fine print, we’ve got you covered. Thanks for reading, and CU in the next post.