Credit History Legislation

The following states (California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington) have enacted credit history legislation which places restrictions on utilizing credit history reports for employment purposes with exceptions for permissible purposes. New York City has also passed legislation which places restrictions on utilizing credit history reports for employment purposes.

California

Employers – with the exception of certain financial institutions – will be prohibited from obtaining a consumer credit report for employment purposes unless the position of the person for whom the report is sought is:

  • A managerial position
  • A position in the state Department of Justice
  • A sworn peace officer or other law enforcement position
  • A position for which the information contained in the report is required by law to be disclosed or obtained
  • A position involves regular access to specified personal information for any purpose other than routine solicitation and processing of credit card applications in a retail establishment, including bank or credit card account information, social security number, and date of birth
  • A position in which the applicant/employee is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf
  • A position that involves access to confidential or proprietary information, as specified in California Labor Code section 1024.5(a)(7)
  • Position involves regular access to $10,000 or more of cash of the employer, a customer, or client, during the workday

Colorado

Under Colorado’s law, “substantially related to the employee’s current or potential job” is defined to apply to positions that:

  • Constitute executive or management personnel or officers or employees who constitute professional staff to executive and management personnel, and the position involves one or more of the following:

-Setting the direction or control of a business, division, unit or an agency of a business

        -A fiduciary responsibility to the employer

-Access to customers’, employees’, or the employer’s personal or financial information (other than information ordinarily provided in a retail transaction)

        -The authority to issue payments, collect debts or enter into contracts

-Involves contracts with defense, intelligence, national security or space agencies  of the federal government.

Requesting Employee Consent to Obtain a Credit Report
In addition to the prohibition on the use of credit information for employment purposes, the new Colorado law prohibits employers or their agents from requiring an employee to consent to a request for a credit report that contains information about the employee’s credit score, credit account balances, payment history, savings or checking account balances, or savings or checking account numbers as a condition of employment unless:

  • The employer is a bank or financial institution;
  • The report is required by law
  • The report is substantially related to the employee’s current or potential job and the employer has a bonafide purpose for requesting or using information in the credit report and is disclosed in writing to the employee.

The written disclosure requirement here is a new procedural step with which most employers meeting the “substantially related” exception will not be familiar. Employers meeting these criteria now need to provide applicants/employees with a notice of their business purpose for requesting credit information.

Connecticut

Under the law, employers may not require an employee or prospective employee to consent to a credit report, subject to the following exceptions:

  • The employer is a financial institution, as defined under the law;
  • The report is required by law;
  • The employer reasonably believes the employee has engaged in specific activity that constitutes a violation of the law related to the employee’s employment
  • Such report is substantially related to the employee’s current or potential job or the employer has a bona fide purpose for requesting or using information in the credit report that is substantially job-related and is disclosed in writing to the employee or applicant.

Under the fourth exception, the report is “substantially related to the employee’s current or potential job” and allowable if the position:

  • Is a managerial position that involves setting the direction or control of a business, division, unit or an agency of a business;
  • Involves access to customers’, employees’ or the employer’s personal or financial information, other than information customarily provided in a retail transaction
  • Involves a fiduciary responsibility to the employer, as defined under the law
  • Provides an expense account or corporate debit or credit card
  • Provides access to certain confidential or proprietary business information, as defined under the law
  • Involves access to the employer’s non-financial assets valued at $2,005 or more, including, but not limited to, museum and library collections and to prescription drugs and other pharmaceuticals

Delaware    

  • It shall be an unlawful employment practice for any public employer to inquire into or consider credit history, or credit score of an applicant for employment during the initial application process, up to and including the first interview
  • If an applicant is otherwise qualified, a public employer may inquire into or consider an applicant’s credit history or credit score after the completion of the first interview

Hawaii

  • Prospective employee has received a conditional offer of employment, which may be withdrawn if information in the credit history or credit report is directly related to a bona fide occupational qualification
  • Employers who are expressly permitted or required to inquire into an individual’s credit history for employment purposes pursuant to any federal or state law
  • Managerial or supervisory employees
  • Employers that are financial institutions in which deposits are insured by a federal agency having jurisdiction over the financial institution.

Illinois

  • Prohibits most employers from using an applicant’s or employee’s credit  history as a factor in any employment decision, including hiring, discharging and terms of employment
  • Prohibits employers from inquiring into an applicant’s or employee’s credit history or obtaining a credit history report from a consumer reporting agency
  • Restricts use of a broad range of credit information regardless of the source of such information; it is NOT limited solely to information obtained from a consumer reporting agency.
  • Applies to employers of any size.
  • Employers may not retaliate or discriminate against a person for exercising rights under the Employee Credit Privacy Act
  • Employers who violate the Act may be sued and ordered to pay damages including attorneys’ fees.
  • Does not allow waivers of the Act’s rights and invalidates any such waivers that exist

Maryland

Under the act, a position for which an employer has a substantially job-related bona fide purpose for requesting or using information in a credit report or credit history includes a position that:

  • Is managerial and involves setting the direction or control of a business, or a department, division, unit or agency of a business.
  • Involves access to personal information—as defined in section 14-3501 of the commercial law article—of a customer, employee or employer, except for personal information customarily provided in a retail transaction.
  • Involves a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money or enter into contracts
  • Is provided an expense account or a corporate debit or credit card
  • Has access to trade secrets or other confidential business information

Additionally, the new law does not apply to any employer that is:

  • Required to inquire into an applicant’s or employee’s credit report or credit history under federal law or any provision of state law for the purpose of employment
  • A financial institution that accepts deposits that are insured by a federal agency, or an affiliate or subsidiary of the financial institution
  • A credit-union share-guaranty corporation that is approved by the Maryland Commissioner of Financial Regulation

Nevada

The statute includes a variety of exceptions that permit employers to request or consider a credit report or other credit information to evaluate an employee or prospective employee for employment, promotion, reassignment, or retention if:

  • the employer is required or authorized, under state or federal law, to use a consumer credit report or other credit information for that purpose; or
  • the employer reasonably believes that the employee or prospective employee has engaged in specific activity that may constitute a violation of state or federal law.

Employers may also request or consider a credit report or other credit information for the purposes described above if the information sought is “reasonably related to the position for which the employee or prospective employee is being evaluated.”  The new law states that the credit report or other credit information shall be deemed reasonably related to an evaluation of the position sought if the new duties of the position involve:

  • the care, custody, and handling of, or responsibility for, money, financial accounts, corporate credit or debit cards, or other assets;
  • access to trade secrets or other proprietary or confidential information
  • managerial or supervisory responsibility
  • the direct exercise of law enforcement authority as an employee of a state or local law enforcement agency
  • the care, custody and handling of, or responsibility for, the personal information of another person;
  • access to the personal financial information of another person
  • employment with a financial institution chartered under state or federal law, including a subsidiary or affiliate of such a financial institution
  • employment with a licensed gaming establishment (as defined by Nevada state law)

Oregon

  • Employers that are federally insured banks or credit unions;
  • Employers that are required by state or federal law to use individual credit history for employment purposes
  • The employment of a public safety officer who is a member of a law enforcement unit, who is employed as a peace officer commissioned by a city, port, school district, mass transit district, county, Indian reservation, the Criminal Justice Division of the Department of Justice, the Oregon State Lottery Commission or the Governor and who is responsible for enforcing the criminal laws of this state or laws or ordinances related to airport security
  • The obtainment or use by an employer of information in the credit history of an applicant or employee because the  information is substantially job-related and the employer’s reasons for the use of such information are disclosed to the employee or prospective employee in writing

Vermont

  • The information is required by state or federal law or regulation.
  • The position of employment involves access to “confidential financial information,” which means sensitive financial information of commercial value that a customer or client of the employer gives explicit authorization for the employer to obtain, process and store and that the employer entrusts only to managers or employees as a necessary function of their job duties.
  • The employer is a financial institution or a credit union as defined under applicable state law.
  • The applicant or employee will or does work as a law enforcement officer, emergency medical personnel or a firefighter (as those positions are defined in state law).
  • The position will require the applicant or employee to have a financial fiduciary responsibility to the employer or a client of the employer, including the authority to issue payments, collect debts, transfer money or enter into contracts
  • The employer can demonstrate that the information is a valid and reliable predictor of employee performance in the specific position of employment
  • The position of employment involves access to an employer’s payroll information

Washington

  • Substantially job related and the employer’s reasons for use of such information are disclosed to the consumer in writing
  • Required by law