Consumer Credit Information and Compliance for Employers

AB-22 limits an employer’s use of credit reports in hiring decisions in the state of California. Employers may not use a credit report for employment purposes except for the following exceptions. It is the End-Users responsibility to ensure that they are requesting credit reports only on candidates that meet the exceptions detailed below. End-Users must notify the candidate in-writing that they are subject to a credit check and the exception that allows for the credit check.This notice can be included with the Notice regarding background checks in California.  

Notice Regarding Background Checks and Credit Checks per CA Law

You must identify on the above form, which exception qualifies the candidate for a credit check:
(1) A managerial position. (See link for definition)
(2) A position in the state Department of Justice.
(3) That of a sworn peace officer or other law enforcement position.
(4) A position for which the information contained in the report is required by l aw to be disclosed or obtained.
(5) A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to all of the following types of information of any one person: (A) Bank or credit card account information. (B) Social security number. (C) Date of birth.
(6) A position in which the person is, or would be, any of the following: (A) A named signatory on the bank or credit card account of the employer. (B) Authorized to transfer money on behalf of the employer. (C) Authorized to enter into financial contracts on behalf of the employer.
(7) A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who may obtain economic value from the disclosure or use of the information, and (ii) is the subject of an effort that is reasonable under the circumstances to maintain secrecy of the information.
(8) A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday. (b) This section does not apply to a person or business subject to Sections 6801 to 6809, inclusive, of Title 15 of the United States Code and state and federal statutes or regulations implementing those sections if the person or business is subject to compliance oversight by a state or federal regulatory agency with respect to those laws.

AN ACT PREVENTING THE USE OF CREDIT SCORES BY CERTAIN EMPLOYERS IN HIRING DECISIONS requires that the need to run a credit report on a candidate must be:
(4) “Substantially related to the employee’s current or potential job” means the information contained in the credit report is related to the position for which the employee or prospective employee who is the subject of the report is being evaluated because the position:
(A) Is a managerial position which involves setting the direction or control of a business, division, unit or an agency of a business;
(B) Involves access to customers’, employees’ or the employer’s personal or financial information other than information customarily provided in a retail transaction;
(C) Involves a fiduciary responsibility to the employer, including, but not limited to, the authority to issue payments, collect debts, transfer money or enter into contracts;
(D) Provides an expense account or corporate debit or credit card;
(E) Provides access to (i) confidential or proprietary business information, or (ii) information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret that: (I) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from the disclosure or use of the information; and (II) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; or
(F) Involves access to the employer’s nonfinancial assets valued at two thousand five dollars or more, including, but not limited to, museum and library collections and to prescription drugs and other pharmaceuticals.

An employer in Colorado “SHALL NOT USE CONSUMER CREDIT INFORMATION FOR EMPLOYMENT PURPOSES UNLESS THE INFORMATION IS SUBSTANTIALLY RELATED TO THE EMPLOYEE’S CURRENT OR POTENTIAL JOB and has “DISCLOSED IN WRITING TO THE EMPLOYEE” that a credit report will be obtained.
Substantially Related to the Employee’s current or potential job is defined as:
THE INFORMATION CONTAINED IN A CREDIT REPORT IS RELATED TO THE POSITION FOR WHICH THE EMPLOYEE WHO IS THE SUBJECT OF THE REPORT IS BEING EVALUATED BECAUSE THE POSITION:
(I) CONSTITUTES 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:
(A) SETTING THE DIRECTION OR CONTROL OF A BUSINESS, DIVISION, UNIT, OR AN AGENCY OF A BUSINESS;
(B) A FIDUCIARY RESPONSIBILITY TO THE EMPLOYER;
(C) ACCESS TO CUSTOMERS’, EMPLOYEES’, OR THE EMPLOYER’S PERSONAL OR FINANCIAL INFORMATION OTHER THAN INFORMATION CUSTOMARILY PROVIDED IN A RETAIL TRANSACTION; OR
(D) THE AUTHORITY TO ISSUE PAYMENTS, COLLECT DEBTS, OR ENTER INTO CONTRACTS; OR (II) INVOLVES CONTRACTS WITH DEFENSE, INTELLIGENCE,                       NATIONAL SECURITY, OR SPACE AGENCIES OF THE FEDERAL GOVERNMENT

IF AN EMPLOYER RELIES, IN WHOLE OR IN PART, ON CONSUMER CREDIT INFORMATION TO TAKE ADVERSE ACTION REGARDING THE EMPLOYEE WHOSE INFORMATION WAS OBTAINED, THE EMPLOYER SHALL DISCLOSE THAT FACT, AND THE PARTICULAR INFORMATION UPON WHICH THE EMPLOYER RELIES, TO THE EMPLOYEE. THE EMPLOYER SHALL MAKE THE DISCLOSURE REQUIRED UNDER THIS SUBSECTION (4) TO AN EMPLOYEE IN WRITING OR TO AN APPLICANT USING THE SAME MEDIUM IN WHICH THE APPLICATION WAS MADE.

Under SECTION 1.  Chapter 378, Hawaii Revised Statutes Inquiry into and consideration of a prospective employee’s credit history or credit report may take place only after the prospective employee has received a conditional offer of employment.  The offer of employment may be withdrawn only if information in the credit history or credit report is directly related to a bona-fide occupational qualification.

• The prohibition against an employer’s refusal to hire or employ, barring or terminating from employment, or otherwise discriminating on the basis of credit history shall not apply to managerial or supervisory employees; and
• The prohibition against an employer’s refusal to hire or employ, barring or terminating from employment, or otherwise discriminating on the basis of credit history shall not apply to employers that are financial institutions in which deposits are insured by a federal agency having jurisdiction over the financial institution.
  • “Managerial employee” means an individual who formulates and effectuates management policies by expressing and making operative the decisions of the individual’s employer.
  • “Supervisory employee” means an individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibility to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment.”
    

The Employee Credit Privacy Act prohibits the use of credit information for employment purposes unless:

a satisfactory credit history is an established bona fide occupational requirement of a particular position or a particular group of an employer’s employees.
A satisfactory credit history is not a bona fide occupational requirement unless at least one of the following circumstances is present:
(1) State or federal law requires bonding or other security covering an individual holding the position.
(2) The duties of the position include custody of or unsupervised access to cash or marketable assets valued at $2,500 or more.
(3) The duties of the position include signatory power over business assets of $100 or more per transaction.
(4) The position is a managerial position which involves setting the direction or control of the business.
(5) The position involves access to personal or confidential information, financial information, trade secrets, or State or national security information.
(6) The position meets criteria in administrative rules, if any, that the U.S. Department of Labor or the Illinois Department of Labor has promulgated to establish the circumstances in which a credit history is a bona fide occupational requirement.
(7) The employee’s or applicant’s credit history is otherwise required by or exempt under federal or State law.

Under Chicago Human Rights Ordinance, unless employers meet an exemption, employers:

• May not inquire about the credit history of an applicant or employee.
• May not order or obtain the credit report of an applicant or employee.
• May not rely on a credit history or credit report to fire, refuse to hire, refuse to recruit, or discriminate regarding terms or conditions of employment.

Examples where satisfactory credit history may be required include—

• Jobs in banking.
• Jobs in insurance or surety companies.
• Jobs in municipal law enforcement or investigative agencies.
• Jobs in debt collection businesses.
• Jobs where a satisfactory credit history is required under other laws or is a “bona fide occupational requirement” for a particular position or group of employees.
  

The Job Applicant Fairness Act prohibits an employer from requesting an applicant’s credit report unless:
THE APPLICANT HAS RECEIVED AN OFFER OF EMPLOYMENT; AND
THE EMPLOYER HAS A BONA FIDE PURPOSE FOR OBTAINING REQUESTING OR USING INFORMATION IN THE CREDIT REPORT OR CREDIT HISTORY THAT IS:
SUBSTANTIALLY JOB–RELATED; AND
DISCLOSED IN WRITING TO THE EMPLOYEE OR APPLICANT.
A POSITION FOR WHICH AN EMPLOYER HAS A BONA FIDE PURPOSE THAT IS SUBSTANTIALLY
JOB–RELATED FOR REQUESTING OR USING INFORMATION IN A CREDIT REPORT
OR CREDIT HISTORY INCLUDES A POSITION THAT:
(I) IS MANAGERIAL AND INVOLVES SETTING THE DIRECTION OR CONTROL OF A BUSINESS, OR A DEPARTMENT, DIVISION, UNIT, OR AGENCY OF A BUSINESS;
(II) INVOLVES ACCESS TO PERSONAL INFORMATION, AS DEFINED IN § 14–3501 OF THE COMMERCIAL LAW ARTICLE, OF A CUSTOMER, EMPLOYEE, OR EMPLOYER, EXCEPT FOR PERSONAL INFORMATION CUSTOMARILY PROVIDED IN A RETAIL TRANSACTION;
(III) INVOLVES A FIDUCIARY RESPONSIBILITY TO THE EMPLOYER, INCLUDING THE AUTHORITY TO ISSUE PAYMENTS, COLLECT DEBTS, TRANSFER MONEY, OR ENTER INTO CONTRACTS; (IV) IS PROVIDED AN EXPENSE ACCOUNT OR A CORPORATE DEBIT OR CREDIT CARD; OR (V) HAS ACCESS TO: 1. INFORMATION, INCLUDING A FORMULA, PATTERN, COMPILATION, PROGRAM, DEVICE, METHOD, TECHNIQUE, OR PROCESS, THAT: A. DERIVES INDEPENDENT ECONOMIC VALUE, ACTUAL OR POTENTIAL, FROM NOT BEING GENERALLY KNOWN TO, AND NOT BEING READILY ASCERTAINABLE BY PROPER MEANS BY, OTHER PERSONS WHO CAN OBTAIN ECONOMIC VALUE FROM THE DISCLOSURE OR USE OF THE INFORMATION; AND B. IS THE SUBJECT OF EFFORTS THAT ARE REASONABLE UNDER THE CIRCUMSTANCES TO MAINTAIN ITS SECRECY; OR 2. OTHER CONFIDENTIAL BUSINESS INFORMATION;

USE OF CONSUMER CREDIT REPORT OR OTHER CREDIT INFORMATION

An employer in NV may not request or consider a consumer credit report for employment unless:

      1.  The employer is required or authorized, pursuant to state or federal law, to use a consumer credit report or other credit information for that purpose;

      2.  The employer reasonably believes that the employee or prospective employee has engaged in specific activity which may constitute a violation of state or federal law; or

      3.  The information contained in the consumer credit report or other credit information is reasonably related to the position for which the employee or prospective employee is being evaluated for employment, promotion, reassignment or retention as an employee. The information in the consumer credit report or other credit information shall be deemed reasonably related to such an evaluation if the duties of the position involve:

      (a) The care, custody and handling of, or responsibility for, money, financial accounts, corporate credit or debit cards, or other assets;

      (b) Access to trade secrets or other proprietary or confidential information;

      (c) Managerial or supervisory responsibility;

      (d) The direct exercise of law enforcement authority as an employee of a state or local law enforcement agency;

      (e) The care, custody and handling of, or responsibility for, the personal information of another person;

      (f) Access to the personal financial information of another person;

      (g) Employment with a financial institution that is chartered under state or federal law, including a subsidiary or affiliate of such a financial institution; or

      (h) Employment with a licensed gaming establishment, as defined in NRS 463.0169.

NYC Stop Credit Discrimination in Employment Act prohibits employers from using credit information unless the position meets one of the following exemptions:

•  A position with (i) signatory authority over third party funds or assets valued at $10,000 or more, or (ii) fiduciary responsibility to the employer and authority to enter into financial agreements valued at $10,000 or more on behalf of the employer;

•  A position with regular duties allowing an employee to modify digital security systems designed to prevent the unauthorized use of the employer’s or client’s networks or databases;

•  A non-clerical position with regular access to trade secrets or national security/intelligence information;

•  The employer is required to use an individual’s consumer credit history for employment purposes under state or federal law/regulations or by a self-regulatory organization (as defined by the Securities Exchange Act of 1934);

•  A position as a police officer or peace officer, or various positions with a law enforcement or investigative function at the Department of Investigation or subject to background investigation by the Department of Investigation;

• A position requiring bonding under federal, state, or city law (e.g., certain positions in finance);
• A position requiring security clearance under federal or any state law

Employers should notify the employee or applicant of the claimed exemption.  A sample of such a notice is available Notice Regarding Credit Checks Per City of New York Law:

Employers should maintain a log of the Use of an exemption. See Section IV of the Guidance provided by NYC

The Unlawful Credit Screening Practices in Employment makes it unlawful discriminatory practice for an employer to procure, to seek a person’s cooperation or consent to procure, or to use credit information regarding an employee or applicant in connection with hiring, discharge, tenure, promotion, discipline or consideration of any other term, condition or privilege of employment with respect to such employee or applicant.

The prohibition does not apply if the credit report is sought for:

(a) to any law enforcement agency or financial institution;
(b) to the City of Philadelphia with respect to efforts to obtain information regarding taxes or other debts owed to the City;
(c) if such information must be obtained pursuant to state or federal law;
(d) if the job requires an employee to be bonded under City, state, or federal law;
(e) if the job is supervisory or managerial in nature and involves setting the direction or policies of a business or a division, unit or similar part of a business;
(f) if the job involves significant financial responsibility to the employer, including the authority to make payments, transfer money, collect debts, or enter into contracts, but not including handling transactions in a retail setting;
(g) if the job requires access to financial information pertaining to customers, other employees, or the employer, other than information customarily provided in a retail transaction; or
(h) if the job requires access to confidential or proprietary information that derives substantial value from secrecy.

If an employer uses the information in a credit report adversely, the employer:
(a) shall disclose the fact of such reliance to the person in writing and identify and provide the particular information upon which the employer relied; and
(b) give the employee or applicant an opportunity to explain the circumstances surrounding the information at issue before taking any such adverse action.

2015 ORS 659A.320¹ Discrimination based on information in credit history prohibited
It is an unlawful employment practice for an employer to obtain or use for employment purposes information contained in the credit history of an applicant for employment or an employee, or to refuse to hire, discharge, demote, suspend, retaliate or otherwise discriminate against an applicant or an employee with regard to promotion, compensation or the terms, conditions or privileges of employment based on information in the credit history of the applicant or employee.

Credit history may be obtained if the credit history is sought for:

(a)Employers that are federally insured banks or credit unions;

(b)Employers that are required by state or federal law to use individual credit history for employment purposes;

(c)The application for employment or the employment of a public safety officer who will be or who is:

 (A)A member of a law enforcement unit;

(B)Employed as a peace officer commissioned by a city, port, school district, mass transit district, county, university under ORS 352.121 (University police departments and officers) or 353.125 (Creation of police department and commission of police officers), Indian reservation, the Superintendent of State Police under ORS 181A.340 (Commissioning of humane special agents), the Criminal Justice Division of the Department of Justice, the Oregon State Lottery Commission or the Governor or employed as a regulatory specialist by the Oregon Liquor Control Commission; and

(C)Responsible for enforcing the criminal laws of this state or laws or ordinances related to airport security; or

(d)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.

Pre-employment credit report may NOT be obtained unless the applicant is applying for one of the following positions:

• Managerial positions;
• Positions for which a credit report is required by law;
• Positions that require access to financial or personal information of other persons and not the information usually provided for a purchase transaction;
• Positions that require access to trade secrets (as defined by local law);
• Positions that require a fiduciary responsibility to the employer; and certain positions that have regular access to cash or other goods.

Before obtaining a credit report for a position that meets an exception, the employer must obtain the employee’s written consent to order a credit report.

Under RCW 19.182.020 in Washington state an employer may not procure a consumer report for employment purposes where any information contained in the report bears on the consumer’s creditworthiness, credit standing, or credit capacity, unless the information is either: