Couple with loan officer ITIN lending represents a growth opportunity for CUs.

ITIN lending represents a solid marketing demographic for credit unions. Is your credit union taking full advantage of it? If not, you should be. Here’s why. The Filene Research Institute recently concluded its incubator loan project in December 2017, with ITIN lending being the most popular segment of the experiment. The program introduced the following five loan packages to immigrants/minorities:

  • Automobile refinance loans
  • QCash small dollar loans
  • Micro-finance small business loans (community-based)
  • Payday payoff installment loans
  • ITIN lending

To make these loans possible, credit unions used targeted data mining and alternative relationship factors in addition to credit scores, alternative data and ITIN numbers rather than Social Security numbers as a basis for identification. And while this segment does carry risk, it can be measured. Plus, the numbers speak for themselves.

By the end of the test, 40 credit unions were recruited, and 58,482 loans totaling $84.4 million were issued. However, of the five, ITIN loans were most popular among lenders and immigrant borrowers. Furthermore, 99% of immigrant borrowers were classified as minorities, marking a strong lending demographic for the incubator project.

Yet, here is where the statistics get really interesting. Two-thirds of immigrant ITIN borrowers were new to credit unions. (The search for your next major membership marketing demographic is over!) Even better, 97% of ITIN borrowers surveyed said they would recommend an ITIN loan to their family and friends. The combined ROA was 3.84% (industry-wide, it’s 0.75%).

Differences Between ITIN Lending and Traditional Lending

Whereas traditional lending uses Social Security numbers for proof of identity, ITIN lending requires a bit more. The reason involves the IRS. According to the Internal Revenue Service, an individual taxpayer identification number is not sufficient in and of itself as proof of identity. In other words, just because you have one doesn’t mean you are who you say you are, at least as far as Uncle Sam is concerned.

Individuals require further proof. However, Customer Identification Program rules make it easy for ITIN holders to comply with the Bank Secrecy Act, which governs financial policy. Members simply need to provide the following three pieces of information:

  • Name
  • Date of birth
  • Address

So, if your credit union is in an area where the Hispanic population is growing rapidly, ITIN loans could be a good fit since there are literally millions of ITIN holders in this space. And while no rule says you must accept ITIN lenders, doing so could position your credit union as inclusive, forward thinking and cutting edge. Plus, think of the potential membership growth.

Things to Consider With ITIN Lending

Finally, there are a few things you need to keep in mind regarding ITIN loans. Pay attention to these points to see if ITIN lending is a good fit for your credit union.

Spanish Membership Documents and Lending Forms

As your credit union offers different lending solutions, keep in mind that providing documents in Spanish may open up the market for your credit union. Listening to and serving your members is key for your credit union’s growth. Making your lending documents available to all potential members promotes a sense of transparency and care for your credit union community’s needs. Even the CFPB offers a Spanish version of its site. Make sure that your translated documents are compliant with state and federal requirements.

ITIN by Itself Is Not Enough

Remember, individual taxpayer identification numbers by themselves are not enough to establish validity for lending. As stated previously, it must be paired with a name, address and date of birth. All of these work together to corroborate identity verification.

ITIN and SSN Is a Huge Red Flag

Typically, consumers will have either an ITIN or Social Security number, but not both. If they do, you will need to research the issue for clarity. If you are unable to get clarity on the duality, then you may need to file a Suspicious Activity Report.

Risk Tolerance

ITIN lending carries risk, however, it’s not necessarily tied to the fact that the loan won’t be paid back. It could, however, result in a situation where the borrower is forced to leave the country before the loan is repaid. Consider this risk element to determine if ITIN lending is ultimately right for your credit union.

The best way to think of ITIN lending involves risk versus reward. This is a decision your board and executive management will make together as they weigh the potential positive community impact against potential risk factors.

Richard Gallagher

Richard Gallagher is CEO for Oak Tree Business Systems, Inc. He can be reached at 800-537-9598 or