New York City Enacts Strict Law Banning Credit Checks in Hiring Decisions

Beginning on September 2, 2015, the Stop Credit Discrimination in Employment Act, which amends the New York City Human Rights Law, goes into effect and prohibits all New York City employers with four or more employers from running credit checks on most job applicants and current employees.

Unlike “ban-the-box” legislation, which restricts when and how an applicant’s criminal history can be considered in the hiring process, the Stop Credit Discrimination in Employment Act prohibits employers from considering, in any way at any time, most applicants’ or employees’ credit histories, including credit scores, credit reports, details about credit accounts, late or missed payments, charged-off debts, bankruptcies, judgments, or liens.

As of September 2, 2015, it is an unlawful discriminatory practice for a New York City employer (1) “to request or to use for employment purposes the consumer credit history of an applicant for employment or employee,” or (2) “[to] otherwise discriminate against an applicant or employee with regard to hiring, compensation, or the terms, conditions or privileges of employment based on the consumer credit history of the applicant or employee.”  Violations are subject to a private right of action by job applicants and employees, in addition to civil penalties.

The New York City ban on credit checks does not apply to positions subject to credit checks under state or federal law or to jobs requiring bonding, security clearance, access to trade secrets, signatory authority or fiduciary responsibilities for over $10,000 in third party funds, and many IT security positions.

Although several states and cities (e.g., California, Chicago, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington) have already enacted laws banning credit checks in hiring, none are as restrictive as New York City’s law.  This strict credit check law comes on the heels of legislation signed on April 20, 2015, requiring the New York City Human Rights Commission to conduct at least five investigations per year using “testers” to apply for open jobs, in an attempt to identify private sector employment discrimination, including unlawful credit check discrimination.

New York City employers should promptly review and update their credit check policies to ensure compliance by September 2, 2015 and consult with counsel on potentially applicable exemptions.