Credit Based Discrimination

Generally speaking, employers are allowed to check a potential or current employee's credit history and then make an adverse employment decision (i.e. the decision to either hire or fire the person) based on the results of the credit report. There are some limitations on this general rule, however, and employers must follow certain procedures when checking an individual's credit history. These limitations are outlined in the federal law known as the Fair Credit Reporting Act (FCRA).

First, the FCRA requires that an employer obtain written permission from an individual before checking his or her credit history. Next, after checking an individual's credit report, employers must notify that person before taking an adverse employment action against them based on the results of the credit check. The employer must also provide the individual with a copy of the report and allow them a short period of time to dispute any errors in the report before taking the adverse employment action.

New York State has its own law on procedures that must be followed by an employer when checking one's credit history, which generally mirrors the language of the FCRA. New York City law, on the other hand, provides additional protections to potential and current employees not included under federal or state law.

Under the Stop Credit Discrimination in Employment Act (SCDEA), which is an amendment to the New York City Human Rights Law, it is illegal for an employer to request or use an individual's credit history for the purposes of making any employment decision, subject to eight very limited exceptions mostly related to federal investigations or government positions requiring security clearance. Violations of the SCDEA carry significant penalties for the employer, in addition to other money damages that may be available to the individual who was discriminated against under the SCDEA.