Credit Reports: State by State Guidelines

Credit reports are useful for the valuable insights they offer, but be careful.

Credit reports are valuable because they can offer insight into a candidate’s reliability and a sense of their personal responsibility. Reports include account standing with creditors, information regarding past employers and public filings such as bankruptcies, liens and judgments.  While a candidate’s credit history is an essential piece of information for many jobs and professions, some states have limited an employer’s right to use that information in making a hiring decision except in reserved circumstances.  The general rule seen across the states is that a candidate’s credit information must be applicable to the position in which they are employed or are applying for.  A credit report is a great option to include in a background screen when the position is related to finance, includes handling private and proprietary information, or involves access to a company credit/debit card.
We wanted to share the below state guidelines with you so that you are aware of any criteria that may impact your use of our Employment Credit Report product.  Please contact USAFact at 800-283-2463 if we can help provide any further detail or insight.

California: Employers may not use a candidate’s credit history in making employment decisions unless the report is sought for one of the following: a managerial position, a position in the state Department of Justice, a law enforcement position, a position for which the information contained in the report is required by law to be disclosed, a position that involves regular access to confidential information (e.g., credit card account, social security number or date of birth), a position which the person can enter into financial transactions on behalf of the company, a position that involves access to confidential information, or a position that involves regular access to cash of $10,000 or more of the employer/customer/client.

If the applicant/employee elects to receive a copy of any consumer credit report contemporaneously with the employer, then the employer must request that a copy be provided to the employee or applicant when the employer requests its copy. The employer must pay for the report and cannot charge the consumer a fee for this service.

Our customer service team will be happy to provide you with a notice for your candidate which explains that a credit report will be ordered and for which allowable purpose.

Colorado: Employers may not use consumer credit information for employment purposes for an applicant or employee unless the report is substantially related to the employee’s current or potential job.   An employer or employer’s agent may not require 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/numbers as a condition of employment unless (1) the employer is a bank or financial institution; (2) the report is required by law; or (3) the report is substantially related to the employee’s current or potential job and the employer has a bona fide purpose for requesting or using the information in the credit report that is substantially related to the employee’s current/potential job and is disclosed in writing to the employee.

Connecticut: Prohibition does not apply to a  financial institution or when an employer reasonably believes that a candidate committed a violation of the law related to their job. Employers also may proceed when a report is “substantially related” to a candidate’s current/potential job or the employer has a bona fide purpose to request or use the information in the report that is substantially job-related and is disclosed to the employee or applicant in writing. Information is substantially related when position is a managerial job that involves setting direction/control of business; involves access to personal or financial information other than that customarily provided in a retail transaction; involves a fiduciary responsibility to the employer; provides expense account or corporate debit/credit card; provides access to confidential or proprietary information; or involves access to employer’s nonfinancial assets valued at $2005 or more.

Hawaii: Employers may not refuse to hire or otherwise discriminate against any individual in the terms, conditions and privileges of employment because of his/her credit history/report, unless (1) such information directly relates to a bona fide occupational qualification, (2) the employer is expressly permitted/required to inquire into credit history for employment purposes by law, (3) the inquiry/consideration involves a “managerial” or “supervisory” employee, or (4) the employer is a financial institution in which deposits are insured by a federal agency having jurisdiction over the financial institution.

Illinois: Employers may not (1) use a candidate’s credit history or credit report as a factor in any employment decision, (2) inquire into an applicant’s or employee’s credit history, or (3) order or obtain a candidate’s credit report from a consumer reporting agency unless such information is related to a “bona fide occupational requirement” (BFOQ) for a particular position or group of employees.

Important note:  Many governmental employers and law enforcement units, as well as banks, savings and loan associations, other financial institutions, debt collectors, insurance companies, and surety businesses are excluded from the prohibitions.

Maryland: An employer may not use a candidate’s credit report/history in determining whether to deny employment, discharge the employee, or determine compensation or the terms, conditions, or privileges of employment unless (1) the applicant has received an offer of employment and the credit report/history will be used for a purpose other than those stated above; or (2) the employer has a bona fide purpose for requesting or using information in the report that is substantially job-related and disclosed in writing to the employee or applicant.

Minnesota: The Department of Human Rights recommends that employers determine ways to minimize exposure, such as merely running credit checks on candidates being offered certain jobs, such as fiscal positions, where money-handling is an essential job function.

Nevada: Employers may not condition employment of a candidate on his or her consumer credit report or other credit information, use or inquire about credit report or information, or discharge/discipline/discriminate against a candidate on basis of consumer credit report/information.   An employer may request or consider a consumer credit report or other credit information for the purpose of evaluating a candidate if authorized by state or federal law, if the employer reasonably believes that the individual has engaged in specific activity which may constitute a violation of state or federal law, or if the information contained in the report is reasonably related or “job related” to the position of employment.  The “job relatedness” requirement is met if the duties involve responsibility for financial assets or employment with a financial institution, access to confidential information, managerial or supervisory authority, direct exercise of law enforcement authority, responsibility for or access to another person’s financial information, or employment with a licensed gaming establishment.

New York: Consumer reporting agencies will not provide information about bankruptcies which antedate the report of the most recent bankruptcy by more than 14 years if prospective employees will be paid less than $25,000 annually.

Important Note:  On April 16, 2015, the New York City Council passed the “Stop Credit Discrimination in Employment Act” which would prohibit employers from requesting or using an individual’s consumer credit history in making hiring and employment decisions. The prohibition applies to all employment decisions, including those with respect to hiring, compensation and terms, conditions and privileges of employment. The bill prohibits consideration of credit history at any point, both during and subsequent to the hiring process. “Consumer credit history” is defined in the bill QUITE BROADLY to include an individual’s credit worthiness, credit standing, credit capacity, or payment history, as indicated by: (1) a consumer credit report; (2) credit score; or (3) other information an employer obtains directly from the individual regarding details about credit accounts, including number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit and prior credit report inquiries; or bankruptcies, judgments or liens. The bill would provide aggrieved applicants and employees the same rights and remedies afforded to an individual asserting any other claims pursuant to the New York City Human Rights Law. Mayor Bill de Blasio is likely to sign the bill into law in the near-term. The bill would become effective 120 days from enactment.

Oregon:  Employers may not obtain or use a candidate’s credit history for employment purposes, or use such information in any employment decision, unless (1) the individual is given advance written notice of the reasons for the use of such information, and (2) the credit history is substantially related to the position sought.

Important Note:   The prohibition against using or obtaining credit history does not apply to employers that are federally insured banks or credit unions, employers required by state or federal law to use credit history for employment purposes, or public safety officers who are members of a law enforcement unit.

Vermont:  Employers may not inquire about a candidate’s credit history or credit report.  Employers also may not refuse to hire or otherwise discriminate against candidates based on credit history.

Important Note:  Law enforcement agencies, fire departments, and employers of emergency medical personnel may consider credit history in certain circumstances.  Decisions based on credit history are permitted if the information is required by law, employer is financial institution or credit union, or position involves access to confidential financial, financial fiduciary, or payroll information. The employer must obtain written consent, disclose written reasons for access and any adverse action taken, and provide opportunity to contest accuracy. Employer must pay for costs associated with obtaining history/report. Credit history/report may not be sole factor in employment decision.

Washington:  Consumer reports addressing the consumer’s creditworthiness, credit standing, or credit capacity may not be procured for employment purposes unless: (1) that information is substantially job related and the employer’s reasons for the use of such information are disclosed to the consumer in writing, or (2) it is otherwise required by law.

Marina AshShahid  |  Director of Quality Assurance  |  USAFact, Inc.

Marina.AshShahid@usafact.com | C: 720.202.5167  | O: 800.283.2463 x 2010  | F: 951.656.3336

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