Trump targets undocumented immigrants in sweeping new banking order

President Donald Trump issued an executive order on Tuesday aimed at tightening oversight of the financial sector regarding the citizenship of banking customers. The directive marks a significant move in the administration’s ongoing initiative to restrict access to financial services for individuals living in the country illegally.

The Financial Oversight Order

Under the new order, federal agencies and bank regulators are tasked with identifying signs that undocumented individuals are securing loans, credit cards, or opening bank accounts. The administration contends that the financial system faces inherent credit risks if loans are issued to individuals who could be deported and subsequently unable to repay their debts.

While the administration stated it would not permit financial risks posed by extending services to the “inadmissible and removable alien population,” the final order is notably less restrictive than some industry leaders had initially feared. Reports had previously suggested the White House might make the collection of citizenship information a mandatory requirement for all banking institutions.

Impact on Banking and Lending

Because financial institutions have historically not tracked the citizenship status of their customers, precise data on the systemic risk remains elusive. However, research from the Urban Institute highlights that the mortgage market for those using Individual Taxpayer Identification Numbers (ITINs) is already extremely limited, estimating only 5,000 to 6,000 such mortgages issued. Lenders, along with major entities like Fannie Mae and Freddie Mac, have traditionally shown significant reluctance to extend credit to ITIN holders.

Treasury Secretary Scott Bessent had previously argued for stricter standards, questioning why foreign nationals could access bank accounts without clearer verification of their legal status. Despite this pressure, the banking industry lobbied extensively against mandatory reporting requirements, citing the potential for overwhelming administrative costs and paperwork. As the final order functions more as guidance than a strict mandate, it appears the industry was successful in pushing back against more aggressive reporting measures.

Broadening Financial Restrictions

This executive order aligns with a series of administrative actions designed to limit the integration of undocumented workers into the U.S. financial system. Notably, the Treasury announced last November that certain refundable tax credits would be reclassified as “federal public benefits,” effectively barring some immigrant taxpayers from receiving them. Experts suggest this change heavily impacts DACA recipients and those with Temporary Protected Status. Critics and immigration advocates have warned that placing such barriers on banking could force more individuals into an “unbanked” status, distancing them further from the formal financial system.