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New York State recently amended its Fair Credit Reporting Act to significantly limit employers’ use of consumer credit history in employment decisions. Employers now generally may not request or use an applicant’s or employee’s credit history when making decisions regarding hiring, termination, compensation, promotion, discipline, or other terms and conditions of employment.
The law broadly defines “consumer credit history” to include credit reports, credit scores, and information relating to an individual’s credit accounts, payment history, bankruptcies, judgments, liens, or collection activity. Unless a statutory exception applies, employers also may not ask applicants or employees about their credit history or require authorization to obtain credit information. The restrictions apply regardless of whether the information comes from a background screening company, the individual directly, or another source.
How the Amendment Changes Prior Law
Previously, New York law generally regulated how employers could obtain and use credit reports by requiring disclosures and employee authorization. The amended law goes further by broadly prohibiting employers from requesting or using consumer credit history for most employment decisions, unless a specific statutory exception applies.
Broad restrictions on employment credit checks previously existed only in New York City, but the amendment expands the restrictions statewide.
Limited Exceptions Remain
The law contains several narrow exceptions for positions where credit information may be considered. These include certain law enforcement and investigative positions, jobs requiring security clearance or bonding, roles involving significant fiduciary or financial authority, and certain non-clerical positions with regular access to trade secrets, intelligence information, or digital security systems.
Employers also may use credit information when federal or state law specifically requires it, or when disclosure is required by a court order, subpoena, or law enforcement investigation.
Steps Employers Should Take
New York employers should review current hiring, promotion, and background-screening practices to ensure compliance with the new restrictions. Employers that continue using credit history for certain positions should confirm that a statutory exemption clearly applies and document the basis for relying on that exemption.
Employers should also update job applications, disclosure and authorization forms, hiring procedures, and internal policies to remove prohibited credit inquiries where appropriate. Human resources personnel, recruiters, and hiring managers should receive training regarding the new limitations and the narrow scope of the available exceptions.
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