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House Passes Bill Restricting Employer Credit Checks

On January 29, 2020, the House of Representatives passed the Comprehensive CREDIT Act of 2020 (the “Act”), which would change federal laws pertaining to consumer reporting agencies and credit checks in a number of ways. Significantly for employers, the Act includes an amendment (originally H.R. 3614 – “Restricting Credit Checks for Employment Decisions Act”) to the Fair Credit Reporting Act (“FCRA”), which would restrict the use of credit information for most employment decisions.

Currently, the FCRA does not expressly prohibit employers from using credit checks when making employment decisions. The Act would amend Section 604 of the FCRA by precluding employers from requesting a consumer report bearing on the creditworthiness, credit standing, or credit capacity of an individual for employment purposes, except in limited circumstances where:

  • the employer is required to obtain the report by federal, state, or local law or regulation;

  • the information contained in the report is being used with respect to a national security investigation; or

  • the report is necessary for a background check or related investigation of financial information that is required by federal, state, or local law or regulation.

Under the Act, if an employer intends to invoke one of these exceptions, the employer must disclose to the candidate the reason as well as a citation to the applicable law.

Note that this amendment of the FCRA would not impact other aspects of obtaining consumer reports for employment purposes, so employers would still be able to conduct background checks (subject to state and local restrictions).

The final vote of 221-189 on the Act largely split along party lines. Republican House members expressed concern about H.R. 3614 in committee review of the original bill, noting that the legislation could have unintended and undesirable consequences—particularly in the financial services industry.  Members observed that an employee’s “financial history is particularly important in the financial services industry, where employees routinely have access to vast amounts of personal and financial information.”

As of last year, 11 states – including California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington – and the District of Columbia have enacted laws that restrict the use of credit reports in employment decisions. Cities such as Philadelphia, New York City and Chicago have also passed laws regarding the use of credit checks in employment settings. While state and local laws differ in some respects, many do include narrow exceptions allowing credit checks for banks and financial institutions, positions with access to specified personal information, and positions that involve access to assets above a certain threshold, or that have signatory authority.

The Act now heads to the Senate, where it seems unlikely to pass in its current form, given the partisan divide regarding various provisions contained within the 197-page bill.  We will continue to monitor the legislation.

©2021 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume X, Number 46

About this Author

Nancy Gunzenhauser Popper Labor Employment Attorney Epstein Becker Law Firm
Member of the Firm

NANCY GUNZENHAUSER POPPER is a Member of the Firm in the Employment, Labor & Workforce Management practice, in the New York office of Epstein Becker Green.

Ms. Popper:

  • Counsels clients on compliance with EEO laws, the Americans with Disabilities Act, the Family and Medical Leave Act, worker classification issues, and other federal, state, and local statutes governing the workplace

  • Advises employers in all facets of the employment relationship, from pre-employment considerations and hiring to terminations and post-employment...

Amanda Gomez Lawyer Employment Labor Workforce Management

AMANDA M. GÓMEZ is an Associate in the Employment, Labor & Workforce Management practice, in the New York office of Epstein Becker Green. She will be focusing her practice on wage and hour issues and the preparation of employment policies and procedures as well as employee handbooks and manuals.

Ms. Gómez received her J.D. from Harvard Law School, where she was the Executive Submissions Editor of the Harvard Journal of Law & Gender. While attending Harvard Law, Ms. Gómez served as a Legal Intern at an...