New York City Restricts Use of Candidate Credit History

Do your background reports contain credit information about your candidates?  Some states, and cities, restrict the use of certain credit information for employment purposes.

In New York City, the hub for the financial industry, you may expect the same. If you’re near Wall Street, you might think that looking at job candidates’ financial history would be a no-brainer. In many cases, NYC prohibits the use of consumer credit history for employment purposes.

NYC Restrictions

The Stop Credit Discrimination in Employment Act (SCDEA) is a part of the New York City Human Rights Law (NYCHRL). It places restrictions on the use of consumer credit history information.

In NYC, consumer credit history is “an individual’s credit worthiness, credit standing, credit capacity, or payment history, as indicated by:

  • A consumer credit report
  • Credit score
  • Information an employer gets directly from the individual regarding:
    • Details about credit accounts including the number of accounts, late or missed payments, charged-off debts, items in collections, credit limit, or prior credit inquiries; or
    • Bankruptcies, judgments, or liens

City law generally makes it an unlawful discriminatory practice to request or use an applicant or employee’s consumer credit history for employment purposes.  It is also illegal to discriminate against an applicant or employee regarding hiring, compensation, or the terms, conditions, or privileges of employment based on the applicant or employee’s consumer credit history.

Exceptions to the Law

There are limited exemptions to the SCDEA’s prohibition on the use of consumer credit history.  Consumer credit history can be used for employment purposes if:

  • The employer is required to use it by state or federal law or regulation, or by a self-regulatory organization as defined by federal law
  • The applicant or employee is applying for or is employed in:
    • A police or peace officer position, as defined by NYC law, or a position with law enforcement or investigative function with the NYC Department of Investigation (DOI);
    • A position that is subject to a DOI background investigation provided that the job is both appointed and requires a high degree of public trust;
    • A position that requires an employee to be bonded under city, state, or federal law;
    • A position that requires an employee to possess security clearance under federal or state law;
    • A non-clerical position having regular access to trade secrets, intelligence information, or national security information;
    • A position having signatory authority over third-party funds or assets valued at $10,000 or more;
    • A position that has a fiduciary responsibility to the employer with authority to enter financial agreements valued at $10,000 or more on behalf of the employer
    • A position with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of the employer’s or client’s networks or databases.

Enforcement of Credit Discrimination

The NYC Commission on Human Rights (NYCCHR) is the city agency charged with enforcing the SCDEA. It issued legal guidance to assist employers with compliance.

According to the NYCCR, if an employer chooses to claim an exemption, it should:

  • Inform applicants or employees of the claimed exemption
  • Keep a record of its use of such exemptions for a period of five (5) years from the use date.
  • It should maintain an exemption log that includes:
    • The claimed exemption
    • Why the claimed exemption covers the position
    • The name and contact information of all applicants or employees considered for the exempted position
    • The job duties of the exempted position
    • The qualifications necessary to perform the exempted position
    • A copy of the credit history reported
    • How they obtained the credit history
    • How the credit history led to the employment action

Verified Credentials provides clients with a sample New York City Consumer Credit Report Disclosure. This can help you think about how to notify candidates if you decide to claim an exemption to the SCDEA and obtain a consumer credit history for employment purposes. Log into your Resource Library for the sample disclosure.

The NYCCHR states that it will impose civil penalties of up to $125,000 for SCDEA violations.  However, SCDEA violations resulting from willful, wanton, or malicious conduct could be penalized by up to $250,000.

Talk with your legal counsel to determine if the SCDEA applies to you and how to stay in compliance with NYC law.

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