The D.C. City Council recently passed the Fair Credit in Employment Amendment Act (“the Act”), which now strictly limits an employer’s ability to inquire into an applicant’s credit history as a basis for a hiring decision. The legislation was prompted, in part, by the DC City Council’s concern that a credit history provides no information about job performance, noting that “credit history isn’t a reliable way to measure a person’s ability to do a job.”
While many employers may have a policy to conduct credit checks following a contingent job offer, the Act now prohibits employers from inquiring into an applicant’s credit history at any time in the hiring process, even after a contingent job offer, unless the particular position is exempt from the law’s prohibitions. Specifically, D.C. employers may inquire into an applicant’s or employee’s credit history if the position falls under one of the following:
- Where an employer is otherwise required by D.C. 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;
- Where an employee is applying for a position as or is employed as a police officer, as a special police officer or campus police officer, or in a position with a law enforcement function;
- Employees within the Office of the Chief Financial Officer of D.C.;
- Where an employee is required to possess a security clearance under D.C. law;
- To disclosures by D.C. 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;
- To financial institutions, where the position involves access to personal financial information; or
- Where an employer requests or receives credit information pursuant to a lawful subpoena, court order, or law enforcement investigation.
While the majority of these exemptions are straightforward, the D.C. City Council specifically explained what it means by “financial institutions, where the position involves access to personal information.” Under the new legislation, the term “financial institution” is defined as:
a 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.
In addition, employers also need to remember that, if they are permitted to inquire into credit history, they must comply with the restrictions on credit and background checks contained in the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. Specifically, before using a consumer report, an employer must notify the applicant that the employer might use credit report information to make decisions related to hiring, and obtain written permission from the applicant.
Prior to rejecting a job applicant based on the information contained in the consumer report, an employer must notify the applicant and include a copy of the consumer report in addition to advising the applicant of his or her rights under the FCRA. An applicant must also be given an opportunity to review the report and explain any negative information or dispute its accuracy. Finally, if an applicant is ultimately denied the job, the employer must also give the applicant proper notice of that fact.
While employer use of credit reports in evaluating candidates has declined in recent years, the number of employers that still utilize them remains high. According to a Society for Human Resource Management report, nearly half of employers check a candidate’s credit history, which primarily stems from employer concerns regarding theft, embezzlement, and the threat of liability for negligent hiring or retention.
Now, an employer’s improper inquiry into an applicant’s or employee’s credit history may give rise an investigation by the D.C. Office of Human Rights. If OHR finds that an employer violated the Act, the employer could face fines ranging from $1,000 to $5,000. Employers will face a $1,000 fine for the first violation, $2,500 fine for the second violation, and $5,000 fine for each following violation.
Mayor Muriel Bowser has not signed the legislation passed by the DC City Council yet. However, she has states that the legislation represents values she shares. Thus, we anticipate that the bill, passed unanimously by the DC City Council, will be signed by the Mayor in due time.