Prohibits the use of job applicant's personal credit history as hiring criteria, unless a reasonable nexus exists

Summary of specific provisions

Section 1. Section 296 of the executive law is amended by adding a new subdivision 19-a. This section prohibits the use of credit scores as hiring criteria for employers, unless this information is directly related to the occupational position sought by the applicant or employee. If an employee consents to a credit history background check, he or she must be given and sign an authorization or consent form which explicitly states the specific purpose, uses and limitations of the credit history background information as it pertains to the employment position sought.

Justification

During difficult economic times, individuals seeking employment deserve to be evaluated on their ability to perform the duties of the position for which they apply. In order to narrow applicant pools, employers are using an applicant's credit score to evaluate their ability to perform a job, regardless of relevance to the position. Many applicants, who are otherwise well-qualified for the position sought and who would make good employees, are rejected due to their credit score. This legislation would eliminate this bias by restricting an employer's ability to use credit information, unless credit history is shown to be directly related to the occupational position being pursued by the applicant or employee.

According to the Society for Human Resource Management and security consultant Kroll, about 43% of U.S. employers check job applicant's credit scores. This figure has risen from 34% in 2004. These employers routinely do their background checks without showing there is any connection to the job. Employers claim that they check credit histories prior to offering a job or promotion to find out if an individual's debt load is too high for the salary that they are being offered. While there are certain positions that require credit checks (i.e. positions that involve access or the direct access of handling money or negotiable instruments, positions that involve investigating possible violations of law or state agency rule), employers must be able to justify their reasons for requiring this information and how it directly relates to the position. Since many employers require job applicants to waive their right to privacy, applicants have no other choice than to submit to a credit history inquiry.

There are many factors that can adversely affect a person's credit score without their knowledge. For instance, if too many inquiries are made for an individual's credit report, his credit rating can be negatively affected. An individual's credit history may also be lowered if her spouse had a poor credit rating before they were married or if he had his credit limit reduced due to inactivity.

These adverse actions taken by credit card companies can ultimately hurt an individual's opportunity to g~in employment when companies use credit histories to screen applicants.

Two articles in USA Today {"5 states challenge employer credit checks" (02/13/2009) and "When 'bad' credit stands in the way of a good job" (02/17/2009)) highlighted the negative impact that credit checks have on people seeking employment. Through their investigation, they found that the Transportation Security Administration (TSA) bars people with $5,000 in overdue debt or any federal or state tax lien from working as airport screeners. This method has ruled out 22% of applicants from 2005 to 2007. The checks that the TSA and other companies conduct have raised the question of inadvertent discrimination as 48% of African-Americans have "bad" credit records in comparison to 34% for Hispanics and 27% for Caucasians.

Prior legislative history

2009-2010 (A.2067/S.2837) Referred to Governmental Operations 2006-2007 (A.6328)

Fiscal implications

None.

Effective date

This act shall take effect immediately.