Washington D.C. Bans Using Credit History Information in the Hiring Process

Washington D.C. Fair Credit in Employment Amendment Act of 2016:

Effective April 7, 2017, The D.C. Human Rights Act has been amended to prohibit employers, with limited exceptions, from discriminating against job applicants and current employees based on their credit information.

Key Provisions of the Ordinance

  • It shall be an unlawful discriminatory practice for employers, employment agencies, and labor organizations to directly or indirectly require, request, suggest, or cause any prospective and current employees to submit credit information, or use, accept, refer to, or inquire into an employee’s credit information.
  • Exemptions:
  1. where an employer is otherwise required by District law to require, request, suggest, or cause any employee to submit credit information, or use, accept, refer to, or inquire into an employee’s credit information;
  2. where an employee is applying for a position as or is employed as a police officer with the Metropolitan Police Department, as a special police officer or campus police officer ;
  3. the Office of the Chief Financial Officer of the District of Columbia;
  4. where an employee is required to possess a security clearance under District law ;
  5. disclosures by District government employees of their credit information to the Board of Ethics and Government Accountability or the Office of the Inspector General, or to the use of such disclosures by those agencies ;
  6. financial institutions, where the position involves access to personal financial information; and
  7. where an employer requests or receives credit information pursuant to a lawful subpoena, court order, or law enforcement investigation.

Key Definitions

Credit Information- any written, oral, or other communication of information bearing on an employee’s credit worthiness, credit standing, credit capacity, or credit history.

Inquire- any direct or indirect conduct intended to gather credit information using any method, including application forms, interviews, and credit history checks.

Financial Institution- any bank, savings institution, credit union, foreign bank, trust company, non-depository financial institution, or any other person which is regulated, supervised, examined, or licensed by the Department of Insurance, Securities, and Banking; which has applied to be regulated, supervised, examined, or licensed by the Department of Insurance, Securities, and Banking; which is subject to the regulation, supervision, examination, or licensure by the Department of Insurance, Securities, and Banking; or which is engaged in an activity covered by the District of Columbia Banking Code.

Recommended Actions

  • Review your background check practices to ensure compliance with the new requirements, including that your employment practices do not directly or indirectly request credit information unless an exemption is met.
  • Review your applications and other employment-related documents to ensure there are no references to the procurement or use of credit information.
  • Train all individuals involved in recruitment, hiring, and interviewing to comply with the requirements of this law.


Four Questions to Ask When Using Employment Credit Reports in Hiring

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Most people who use employment credit reports consider the method of payment information, the amount of debt, and the presence of bankruptcies, liens and civil cases to be most enlightening, and use that information to deny employment. But are they correct in so doing? Is that approach defensible? Whether you are looking at a credit report, criminal history, or any other background information containing potentially adverse  information,  when  evaluating  the  past  behavior  of  a  prospective  or current employee to determine suitability for a specific job, you must answer these four questions:

  1. Is it job-related?
  2. Is it current enough to be relevant?
  3. Is it severe enough to be significant considering the time elapsed since it occurred?
  4. Is the report accurate – is it likely that the applicant did (or did not) do it?

The question of job relatedness is the most difficult question to address. For what job is it critical to know that an applicant’s national credit card and local Joe’s Tires accounts are paid promptly every month? Under what circumstances should we consider the judgment in favor of the roofing contractor or hospital in making an employment suitability decision? Some would argue that a poor credit report, or many high credit lines, is a clear indication of a serious risk to their company because that is the best evidence that the subject is at least irresponsible, and probably dishonest. Following this logic, we know that all financially stable folks are always honest and trustworthy, while all poor and financially struggling people are naturally dishonest and untrustworthy.  Right? Of course not.

Is there an answer to the question of job relatedness? Unfortunately, not a clear one although many of the laws referenced in the resources do carve out circumstances, or in some cases positions, for which a credit report may be requested. Note that merely having a law that may permit the use of credit reports does not relieve the employer of the ultimate responsibility to be able to demonstrate job relevance if challenged. Most of the guidance from litigation has come in the form of what is not job related. If you are filling a warehouse position, credit worthiness is not a bona fide occupational qualification. When hiring an individual with clear fiduciary responsibility, like a counter in a money room, it may be appropriate… unless you are hiring in New York City! (Review the New York City Stop Credit Discrimination in Employment Act to learn more).

Do not forget the credit report does not investigate how the information reported came to pass. The raw data provided only pulls the curtain back slightly. The employer has an obligation, in determining job relevance, currency, and accuracy, to complete the research only suggested by the data reported. For example, if the applicant has “bad credit” due to a catastrophic illness in the family, should that have the same weight as someone who has bad credit due to an addiction to television shopping channels and an aversion to paying bills? Many think not and in fact there is a growing legislative movement to specifically exempt medical bills from any credit worthiness evaluation.

Recommendations to Consider

In the absence of reliable direction that is legally defensible, the bare facts in a credit report should not be allowed to disqualify any applicant. An employer has two options when using the employment credit report:

  • When the credit report contains information which, on its face, appears adverse based on job- related standards, that report should be used as the basis for a more in depth review with the candidate to probe the circumstances to determine if there are mitigating factors to explain that derogatory information and to assess whether the adverse information is relevant to the job and should be considered as a factor in the hiring, retention or promotion decision; and/or
  • Establish an annual employment credit report review, (with the appropriate FCRA consents), and review those reports for significant changes in position from year to year.

The second approach is recommended for employees with access to significant amounts of cash and other negotiable instruments, and those who can sign contracts or commit your company to outlays of significant resources, such as buyers, purchasing agents, sometimes including department heads and company officers, when permitted by law. The annual credit audit should be automatic but, again, the presence of a significant change in credit standing should only start an inquiry. It is not to be misconstrued as conclusive proof of wrongdoing.

Generally speaking, if you are not currently using employment credit reports, do not feel that you need to start. Upon close inspection, very few positions actually merit credit inquiries. The questions of integrity that some employers expect to be answered by a single credit report are often better addressed with a combination of thorough background checks, comprehensive and well communicated corporate ethics polices, with established controls and management oversight.

New credit reporting changes are problematic for positions regulated under FINRA. CARCO FAST can help!

credit-report-history-300x171  According to an article by credit.com, the major credit reporting agencies are working on a big change that could bolster a lot of people’s credit scores.

As part of the National Consumer Assistance Plan, Equifax, Experian and TransUnion are planning to significantly reduce the amount of tax-lien and civil-judgment information found in consumer credit files by July 2017. The changes will enhance credit reporting accuracy and make credit information more transparent and user-friendly for consumers.

However, the changes will present a problem in vetting candidates for regulated positions under FINRA that require verification of liens, judgements and civil actions.

CARCO’s Financial Anomalies Search Technology (FAST) can help!  FAST provides compliance officers and recruiters a means to match regulated candidates self-disclosures regarding public civil records, liens or judgments in compliance with Federal, State, or local laws and regulations.  FAST is provided in a two-phase approach so users do not have to pay for research on items that are already disclosed and self-explanatory. Phase I results are provided in an unverified form that allows the user to easily compare those results against the regulated candidate’s disclosures on any applicable personal history form such as the FINRA U-4 or U-5 forms.  When the comparison between the self-disclosures and the CARCO FAST is complete, the reviewer initiates Phase II by selecting specific reported records for further research at the source to obtain accurate, complete, and up to date records matched to the candidate that are actionable.  By allowing the reviewer to identify unmatched records before perfecting those records, research time and cost do not have to be expended for those records that match and have already been disclosed by the candidate.

Regulated entities have already struggled with the limitations of credit reports. However, when this change takes place, credit reports will no longer be any part of the solution to verify liens or judgments.

CARCO FAST is a unique product offered by no other company that can be the solution!

Click here to view CARCO FAST’s Simplified Workflow Infographic.


For more information on CARCO FAST, contact a Specialist at 1-866-557-5984 or click here.

NEW White Paper: A Question of Credit: Proper Use of CREDIT REPORTS in Hiring

White Paper on Using Credit Reps for Hiring  Our clients often ask us how best to handle credit reports in employment decisions. Our response is “always handle with care!”  

Credit reporting is an established and respected feature of our daily commerce and has been used successfully when conducting background checks on prospective employees for job-related purposes. However, the political and social tolerance for the use of credit reports has changed dramatically since the recession of 2008.  And the question of job-relatedness is the most difficult question to address.

We know you have many questions on this subject.  With that in mind, we have created this new White Paper which explores the use of credit in employment decisions, what information is returned in a credit report, recommendations on the proper use of credit reports going forward, and guidance to avoid litigation traps.

Click here to read the White Paper

Philadelphia, PA Fair Practices Ordinance: Restricts use of credit history for employment

Law book  The Mayor of Philadelphia signed a bill restricting the use of an applicant or employee’s credit history for employment purposes. Philadelphia joins the growing list of jurisdictions that have enacted similar laws: California, Chicago, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, New York City, Oregon, Vermont, and Washington.  This legislation goes into effect on July 7, 2016.

According to the Ordinance:

Key Provisions

It shall be an unlawful discriminatory practice for an employer – both public and private – 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. 


  1.  any law enforcement agency or financial institution;
  2. the City of Philadelphia with respect to efforts to obtain information regarding taxes or other debts owed to the City;
  3. if such information must be obtained pursuant to state or federal law;
  4. if the job requires an employee to be bonded under City, state, or federal law;
  5. 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;
  6. 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;
  7. 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; and
  8. if the job requires access to confidential or proprietary information that derives substantial value from secrecy.  

If an employer relies, in whole or in part, on credit information to consider adverse employment action with respect to any person, and exemption (4), (5), (6), (7) or (8) applies, the employer:

  1.  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
  2. give the employee or applicant an opportunity to explain the circumstances surrounding the information at issue before taking any such adverse action.


The ordinance provides aggrieved persons with the right to file a complaint with the Philadelphia Commission on Human Relations or, after timely exhausting administrative remedies, to pursue a private right of action to recover the full panoply of damages available under the Fair Practices Ordinance, which includes compensatory damages, attorney’s fees and punitive damages.

Next Steps

Employers in Philadelphia that use credit reports or other credit information for employment purposes should consult with their employment attorney to ensure compliance. Multi-state employers should review their practices to ensure that they comply with both this ordinance and the laws of the other jurisdictions that now regulate employers’ use of credit information.    


Proposed Bill to Prohibit Use of Credit Reports in Hiring Decisions

Gavel  On September 16th, Representative Steve Cohen (D-TN) introduced HR 3524, the Equal Employment for All Act. The Senate version, S. 1981, is sponsored by Senator Elizabeth Warren (D-MA) and was introduced on August 5th. The bill would “amend the Fair Credit Reporting Act to prohibit the use of consumer credit checks against prospective and current employees for the purposes of making adverse employment decisions.”


According to Cohen, HR 3524 seeks to “protect job seekers from unfair discrimination from employers based on credit ratings that are often inaccurate and bear little to no correlation to job performance or ability to succeed in the workplace.” Specifically, Cohen’s statement asserts that the bill “would protect prospective employees from being forced to disclose their credit history as part of an employer’s application process.”


According to the text of S. 1981, “a person, including a prospective employer or current employer,” may not use a consumer report or procure a consumer report on any consumer during the background screening process that contains information on the consumer’s creditworthiness, credit standing, or credit capacity:


  • For employment purposes; or
  • For making an adverse action, as listed in the bill.

Cohen Statement:


S. 1981: http://www.gpo.gov/fdsys/pkg/BILLS-114s1981is/pdf/BILLS-114s1981is.pdf


NYC Close to Banning Employers From Using Credit Checks to Screen Job Applicants

GavelEmployers should know that there is legislation that could impact hiring practices in New York City.  The New York City Council passed a law that would prohibit the use of credit checks to screen job applicants.  The law currently sits on Mayor de Blasio’s desk awaiting signature and would go into effect 120 days after enactment.
Key provisions of the law are as follows:
  • The term “consumer credit history” means an individual’s credit worthiness, credit standing, credit capacity, or payment history, as directed by: (a) a consumer credit report, (b) credit score, (c) information an employer obtains directly from the individual regarding (1) details about credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or (2) bankruptcies, judgments or liens.  A consumer credit report shall include any written or other communication of any information by a consumer reporting agency that bears on a consumer’s credit worthiness, credit standing, credit capacity or credit history.
  • Except as provided in this subdivision, it shall be unlawful discriminatory practice for an employer, labor organization, employment agency, or agent thereof to request or to use for employment purposes the consumer credit history of an applicant for employment or employee, or 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.
  • This subdivision shall not apply to: (1) an employer, or agent thereof, that is required by state or federal law or regulations or by a self-regulatory organization as defined in section 3(a)(26) of the securities exchange act of 1934, as amended to use an individual’s consumer credit history for employment purposes, (2) persons applying for positions as or employed: (A) as police officers or peace officers, as those terms are defined in subdivisions thirty-three and thirty-four of section 1.20 of the criminal procedure law, respectively, or in a position with a law enforcement or investigative function at the department of investigation, (B) in a position that is subject to background investigation by the department of investigation, provided, however, that the appointing agency may not use consumer credit history information for employment purposes unless the position is an appointed position in which a high degree of public trust, as defined by the commission in rules, has been reposed, (C) in a position in which an employee is required to be bonded under City, state, or federal law, (D) in a position in which an employee is required to possess security clearance under federal law or the law of any state, (E) in a non-clerical position having regular access to trade secrets, intelligence information or national security information, (F) in a position: (i) having signatory authority over third party funds or assets valued at $10,000 or more, or (ii) that involves a fiduciary responsibility to the employer with the authority to enter financial agreements valued at $10,000 or more on behalf of the employer, (G) in a position with regular duties that allow the employee to modify digital security systems established to prevent the unauthorized use of employer’s or client’s networks or databases.
  • Except as otherwise provided in this paragraph, it shall be unlawful discriminatory practice for an agency to request or use for licensing or permitting purposes information contained in the consumer credit history of an applicant, licensee or permittee for licensing or permitting purposes
  • The subparagraph (1) of this paragraph shall not apply to an agency required by state or federal law or regulations to use an individual’s consumer credit history for licensing or permitting purposes
We will keep a close eye on this legislation and will be posting updates.  If you have any questions please feel free to contact a CARCO Specialist at 866-557-5984.

Reminder that 10 states have banned the use of credit history checks in the hiring process

Law bookAll the talk is about ‘Ban the Box’ laws for criminal history checks in the hiring process.  However, there are 10 states that have banned the use of credit history checks in the hiring process.  As a reminder, here’s the list of those 10 states which have banned credit checks:


  1. California
  2. Colorado
  3. Connecticut
  4. Hawaii
  5. Illinois
  6. Maryland
  7. Nevada
  8. Oregon
  9. Vermont
  10. Washington


Employers in those states should ensure that their background screening and hiring processes do not include the use of credit history checks.

New Colorado legislation regarding the use of credit history information by financial institutions for employment purposes

On March 27, 2014, Colorado’s Governor enacted Senate Bill S.B. 102, the “Employment Opportunity Act,” which would add employment positions held at financial institutions to the list of employment positions for which an employer may use consumer credit information for employment purposes. Under current Colorado law, an employer may use consumer credit information for employment purposes if the information is substantially related to the employee’s current or potential job.


The bill would allow bank or financial institution employers to use consumer credit information for employment purposes by amending the definition of “substantially related to the employee’s current or potential job” to include positions held at banks or financial institutions.


View S.B.102 here:




Pending Florida Legislation – Use of Credit History in Hiring

Law bookOn March 4th, Florida State Senator Nancy Detert (R) introduced S.B. 324, which prohibits an employer from using a job applicant’s credit report or credit history in certain hiring, compensation, or employment decisions.


The bill provides:


  • Specific situations in which an employer may use such information;


  • Exemptions for certain types of employers;


  • Remedies for an aggrieved person;


  • For the award of actual damages and court costs; and


  • For a plaintiff to post a bond to indemnify the defendant for damages, including attorney fees.


The Bill has not yet been signed by the Governor.


We will keep you updated on the status of this bill.