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Understanding New York City’s Credit Check Law

Interviewing for a new job in New York can be intimidating, even if the labor market is tight. Many prospective employees worry about the strength of their references and employment history verification, plus the possibility that a background check may expose that one traffic ticket that could bar them from qualification. 

However, while a prospective employer can and will ask you many things (and check them), what they cannot do is check your credit score or ask you questions about your credit rating.

Some employment-seekers may be surprised by this, as it’s a common myth about applying for jobs. However, New York state law has prohibited employers from running credit checks on employees for many years. 

As you apply for jobs, you may notice that a prospective employer has checked your credit. This procedure is illegal, and if it’s happened to you, you should know your rights. An employment lawyer can help.

Laws Against Credit Discrimination

Many municipalities have mandated a prohibition against credit checks as part of the hiring process, and New York City joined the ranks of those worker-friendly jurisdictions in 2015. 

This prohibition occurred when the city government passed the Stop Credit Discrimination in Employment Act (SCDEA). SCDEA is an amendment to the already existing New York City Human Rights Law (NYCHRL) which seeks to eliminate hiring discrimination based on credit checks for members of a protected class.

SCDEA was modeled after the “Ban the Box” employment statute, which prohibits employers from asking about a potential hire’s arrest record. While a conviction record is an essential consideration for many businesses, employees shouldn’t be discriminated against if they were acquitted of the crime they were arrested for. 

In fact, New York City has some of the most stringent laws in the U.S. regarding discriminatory criminal and financial background checks.

New York’s SCDEA law prevents employers from:

  • Running a consumer credit report on current employees and job applicants
  • Requesting a credit transcript from major credit reporting agencies
  • Using consumer credit history as a basis for hiring, firing, or promoting

SCDEA defines an individual’s consumer credit history as their credit rating or payment history for revolving accounts. Furthermore, consumer credit history can encompass anything that an employer learns from an individual’s credit history.

Therefore, employers may not legally request your credit history when making any kind of employment decisions or decisions about disciplinary action at work. 

There are a few exceptions to the SCDEA law, such as for peace and police officers and executive or C-level positions controlling trade secrets or financial matters. However, these only apply to specific jobs and not an entire industry or employer.

SCDEA does not prohibit employers from conducting background checks on potential hires, including examining their qualifications and experience. Employers may ask for a resume and references, as well as social media information, especially LinkedIn accounts. 

They may also conduct an online search. However, employers who violate background check regulations may face fines, back pay and compensatory damages, or other civil (but not criminal) penalties.

Why SCDEA Matters to You

Conducting a credit check or requesting consumer credit history for a prospective or current employee is illegal in New York City. Essentially, companies may not make an employment decision based on information they illegally obtained about you. 

If you believe your current employer, or a company that you interviewed with, was discriminatory based on your consumer credit history, then you may want to consult an employment lawyer.

Woods Lonergan is a business law firm specializing in employment law in New York City. If you have questions or concerns about SCDEA, contact us today.