New York City Council Votes to Limit Credit Checks by Employers

By Scott J. Wenner

On April 16, the New York City Council passed Intro 261A, which bans the use of credit checks to screen applicants for employment except in enumerated circumstances. The legislation, which was supported by Mayor Bill de Blasio and was sponsored by 40 of the 51 members of the Council, is expected to be signed and become law promptly.  It purports to prohibit “discrimination based on consumer credit history” – a practice that is said to adversely affect black and Hispanic workers disproportionately.

When the Mayor signs the credit check ban into law, New York City will join 10 states and several other municipalities that have curtailed this pre-employment practice.  While New York City is not the first jurisdiction to limit the use of consumer credit reports to screen applicants, its chief sponsor, Councilman Brad Lander of Brooklyn, claims that his bill is “the strongest of its type in the country”  – a characterization that might be correct.

Consumer Credit History Broadly Defined.  As passed by the City Council, the bill deems it an unlawful discriminatory practice for an employer to use individuals’ consumer credit histories in making employment decisions. In addition to consumer credit reports and credit scores, the bill defines “consumer credit history” to also include information obtained directly from the applicant or employee about prior bankruptcies, judgments, and liens, as well as “details about credit accounts.” This latter category of information includes “the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit [and] prior credit report inquiries.” The bill also defines “consumer credit report” to include “any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity, or credit history. “

Exceptions.  The bill reportedly contains more exceptions than Councilman Lander had proposed initially as a result of discussions that included the Partnership for New York City – a group representing business interests – as well as labor union representatives. However, it does not contain the kind of broad, top-to-bottom exemption for financial institutions that most existing credit check laws contain. The exceptions to the credit check ban in the forthcoming New York City law will include (i) hiring for police or peace officer jobs, (ii) positions subject to NYC Department of Investigation background checks, (iii) jobs that require the employee to be bonded or demand a government security clearance, (iv) positions  (other than clerical jobs) that require regular access to trade secrets or national security information, (v) workers who operate digital security systems, (vi) employees having signatory authority over third party funds or assets valued at $10,000 or more, or fiduciary responsibility and authority to enter into contracts valued at $10,000 or more for their employer, and (vii) where the employer is required by state or federal law or regulations or by a self-regulatory organization to use an individual’s consumer credit history for employment purposes.

The law will become effective 120 days after it is signed by Mayor de Blasio