credit check

In Focus: New York City’s Credit Check Law

Interviewing for a job in New York City during these unprecedented times can be stressful enough, but there are limits to what a prospective employer can ask you. Certainly, a company has a right to know whether you have the right skills and experience for the position. But an employer cannot ask questions about our creditworthiness or check your credit rating.

This comes as a surprise to many individuals, especially when they learn that employers have been barred from running credit checks on job applicants for several years. If you believe that an employer unlawfully checked your credit, you can recover damages with the help of an experienced employment lawyer. 

Putting an End to Credit Discrimination

A number of jurisdictions throughout the nation prohibit employers from checking credit reports. New York City joined its ranks in 2015 when the Stop Credit Discrimination in Employment Act (“SCDEA”) went into effect, amending the New York City Human Rights Law (“NYCHRL”). That law is an effort to eliminate discriminatory employment credit checks that unfairly target applicants who are members of a protected class. 

The SCDEA is similar to the “Ban the Box” initiative barring employers from inquiring about an applicant’s arrest record. New York City has some of the toughest laws in the country prohibiting discriminatory credit and criminal background checks. 

In particular, the New York City credit check law prohibits employers from:

  • Requesting a consumer credit history from job applicants or current employees
  • Requesting or obtaining a job applicant or employee’s credit history from a consumer reporting agency (e.g. Equifax, Experian, Transunion)
  • Using consumer credit history when making an employment decision or taking an adverse employment action

Under SCDEA, consumer credit history is defined as an individual’s creditworthiness, credit rating, or payment history as indicated by a consumer credit report, credit score or information an employer directly obtains from an individual about his or her credit history. 

In short, this law prohibits employers from requesting or using consumer credit history of an applicant or employee when making any employment decisions (e.g. hiring, compensating, promoting, firing) or any other term or condition of employment. There are exemptions for specific jobs, such as police and peace officers and executive-level jobs with control over finances or trade secrets. These exemptions do not apply to an entire employer or industry, however, and only affect specific jobs.

It is worth noting that the SCDEA does not bar employers from conducting background checks into an applicant’s experience and qualifications for a position, including asking for a résumé, references, social media info (e.g. Linkedin profile), and conducting online searches. Finally, employers who violate the law may be liable for civil penalties and damages such as back pay and compensatory damages. 

Why This Matters

Conducting an employment credit check is a discriminatory practice in New York City, regardless of whether it results in an adverse employment action or not. This basically means an employer who makes any employment decision based on illegally obtained credit information can be held liable for violating the SCDEA. If you believe you have been subjected to a discriminatory employment credit check, talk to an employment lawyer.