New York City Bans Credit Reports …Kind Of

Recently New York City passed legislation to ban the use of credit reports for employment purposes. New York City isn’t the first entity to “ban” the use of credit reports for employment screening. California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington have all already passed similar laws in the past.

Like all of the other state bans, saying that New York City “banned” credit reports isn’t completely accurate. There are several exceptions to the general rule. For New York City specifically, credit reports can still be used for employment purposes if a position requires it by state or federal law. Law enforcement personnel are still subject to credit checks. Also, positions of great responsibility (like signatory authority, or access to trade secrets) fall outside the realm of this ban. There are a few other exemptions as well.

Full List of Exemptions:

  • Positions for which state or federal law and regulations require the use of an employee’s credit history;
  • Law enforcement personnel;
  • Positions that require a background investigation by the New York Department of Investigation;
  • Positions in which an employee is required to be bonded under City, state or federal law;
  • Positions requiring security clearances;
  • Non-clerical positions that have regular access to trade secrets, intelligence information or national security information;
  • Positions having signatory authority over third-party funds or assets valued at $10,000 or more;
  • Positions involving a fiduciary responsibility to the employer with authority to enter financial agreements valued at $10,000 or more on behalf of the employer; and
  • Positions with regular duties that allow the employee to modify digital security systems to prevent the unauthorized use of the employer’s or a client’s networks or databases.

So New York didn’t really ban credit reports…

It’s more accurate to say that this law furthers the FCRA’s (Fair Credit Reporting Act) guidelines for permissible purpose. In the FCRA, “employment purposes” is a permissible purpose for running a credit check. Instead, New York wants there to be a specific job related reason for running the check. That is to say, employers shouldn’t be running a credit check on Joe-Bob the janitor just because they run one on everyone. No, there needs to be a specific, job-related reason for running a credit check.

But “Ban” makes a better headline.

While New York City’s law didn’t completely ban credit reports, it has been the strictest. New York City’s credit report ban allows for the least amount of exceptions in comparison to the other states who have similar laws.

Some advice (not to be considered legal advice) for New York City employers:

Be careful how you interpret the exemptions on credit reports. For instance, the exception for non-clerical positions that have access to trade secrets – be sure not to be too liberal in what you consider trade secrets. On that note, it’s definitely time to revise your employment screening policy. You will need to consult your legal counsel during this process.