Consumer credit refers to the loans, credit cards, and financing options that allow individuals to borrow money for personal use, including everyday purchases, services, and major expenses. It includes both revolving credit (such as credit cards) and installment loans (like auto loans or personal loans). Lenders evaluate factors such as credit scores, income, and repayment history to determine eligibility and interest rates. Strong consumer credit helps borrowers access better financing options, while poor credit can limit opportunities and increase borrowing costs.

All judgments and tax liens to be removed from consumer credit reports

As reported last year, Equifax, Experian and TransUnion (the “NCRAs”) implemented enhanced standards for the collection and timely updating of public record data as part of the requirements of the National Consumer Assistance Plan (the “NCAP”) and accordingly, effective July 1, 2017, removed all civil judgments and the majority of tax liens from their databases.

The NCRAs are now going a step further to comply with the NCAP’s standards and to resolve pending litigation by removing all tax liens from consumer credit reports effective April 16, 2018. Bankruptcy records will continue to be reported.

March 22nd, 2018|Categories: Compliance Corner for Employment Decisions|Tags: , , |

Mid-Year Update on Employment Background Screening Legislation

“BAN-THE-BOX”

List of jurisdictions is growing

“Ban-the-box” measures, which generally prohibit employers from inquiring about a candidate’s criminal history (including performing background checks) until later in the hiring process, and impose significant compliance requirements, will soon be the norm rather than an exception. The list of localities that have enacted such legislation is growing fast and now includes Austin, Baltimore, Buffalo, Chicago, Columbia – MO, Los Angeles (enforcement started July 1, 2017), Montgomery County – MD, New York City, Philadelphia, Portland, Prince George’s County – MD, Rochester, San Francisco, and Seattle, and ten states (Connecticut, District of Columbia, Hawaii, Illinois, Massachusetts, Minnesota, New Jersey, Oregon, Rhode Island, and Vermont (effective July 1, 2017)).

Although not labeled as “ban-the-box,” California’s Department of Fair Employment and Housing regulations (the “Regs”) that went into effect July 1, 2017 impose certain similar requirements when employers consider criminal history information in employment decisions. As reported in our previous blog, the Regs are substantially based on the enforcement guidance issued by the Equal Employment Opportunity Commission in April 2012, and prohibit employers from using a candidate’s criminal history in personnel decisions if such information will have an adverse impact on individuals that are in a legally protected class.

Amended rules for New York City’s “ban-the-box” take effect August 5, 2017

Nearly two years after the enactment of New York City’s Fair Chance Act (FCA), and without much fanfare, the City’s Commission on Human Rights published its amended rules that  establish certain definitions and procedures, and clarify the comprehensive requirements of the FCA when using criminal history in employment decisions, and considering applicants for licenses, registrations, and permits.

CREDIT CHECK RESTRICTIONS

Eleven states (California – AB 22; Colorado – The Employment Opportunity Act; Connecticut  – SB 361; District of Columbia – Fair Credit in Employment Amendment Act, Hawaii – HB 31 SD1; Illinois  – HB 4658; Maryland  – HB 87;  Nevada – SB 127; Oregon – SB 1045; Vermont – Act No. 154 (S. 95); Washington – RCW 19.182 and  RCW 19.182.020) and at least two localities  (New York City – Stop Credit Discrimination in Employment Act, and Philadelphia – Bill No. 160072), have enacted laws that generally prohibit private employers from checking a candidate’s credit history, except in circumstances where a credit screen is justified by the position’s responsibilities or is required by law.

WAGE HISTORY INQUIRIES

Pay equity initiatives, which among their provisions include a ban on inquiries about a candidate’s wages, are gaining momentum nationwide. The following jurisdictions have enacted such laws and many more are considering similar measures: Delaware – HS1 (effective December 14, 2017); Massachusetts – Pay Equity Act (effective July 1, 2018); New York City – Intro 1253 (effective October 31, 2017); Oregon HB 2005 (effective December 1, 2019); Philadelphia – Fair Practices Ordinance: Protections Against Unlawful Discrimination (set to go into effect May 23, 2017 but now facing a legal challenge); Puerto Rico – Equal Pay Act (effective March 8, 2017); and San Francisco – Parity in Pay Ordinance (effective July 1, 2018).

Pending before California’s Senate is AB 168 that would prohibit employers from seeking an applicant’s salary history and impose significant penalties for violations. Notably, California already has a pay equity law, AB 1676, and although the law does not ban salary history inquiries, it does prohibit employers from using a candidate’s prior wages as the sole basis to justify a pay disparity.

WORK AUTHORIZATION VERIFICATIONS

Revised Form I-9

The USCIS released a revised version of Form I-9, Employment Eligibility Verification on July 17, 2017. Employers can use this revised version or continue using Form I-9 with a revision date of “11/14/16 N” through September 17, 2017. Beginning September 18, 2017, however, employers must use the new form (with the revision date of “07/17/17 N”).

Reminder to California employers

California’s  AB 1065 that went into effect January 1, 2017 makes it unlawful for employers to:

  1. request additional or different documents than those required under federal law to verify that an individual is not an unauthorized immigrant;
  2. refuse to accept documents provided by the applicant that reasonably appear to be genuine;
  3. refuse to honor documents or work authorization based on specific status or term that accompanies the authorization to work; and
  4. attempt to re-investigate or re-verify a candidate’s authorization to work using an unfair immigration-related practice.
August 4th, 2017|Categories: Compliance Corner for Employment Decisions|Tags: , , , , , , , |

CFPB publishes annual guide about consumer reporting agencies

Every year, the Consumer Financial Protection Bureau (the “CFPB”) updates and publishes a guide to consumer reporting companies, The guide includes information in connection with requesting a consumer report from the three largest nationwide consumer reporting companies and dozens of specialty reporting companies, tips regarding specialty reports, updated information about authentication of identity when requesting a consumer report, information on companies that provide free credit scores, and rights with respect to consumer reports.

The CFPB notes that in prior years, its guide referred to consumer reporting businesses as “agencies” or “bureaus,” and that these terms can be confusing because they may imply these businesses are government entities. They are not—these companies are private-sector, for-profit entities, and in this year’s guide, the CFPB refers to them as “companies” for better clarity.

February 23rd, 2016|Categories: Compliance Corner for Employment Decisions|Tags: , , |

NYC Commission issues legal enforcement guidance on employment credit checks

The New York City Commission recently issued interpretive legal enforcement guidance clarifying some of the exemptions in the City’s Stop Credit Discrimination in Employment Act (“SCDEA”), as well as recordkeeping requirements and penalties.

As we reported previously, effective September 3, 2015, the SCDEA amends the New York City Human Rights Law (the “NYCHRL”) to make requesting and using consumer credit history for hiring and other employment purposes, with certain exceptions, an unlawful discriminatory practice.

The SCDEA defines “consumer credit history” as an individual’s “credit worthiness, credit standing, credit capacity, or payment history, as indicated by: (a) a consumer credit report; (b) credit score; or (c) information an employer obtains directly from the individual regarding details about (1) credit accounts, including the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit, prior credit report inquiries, or (2) bankruptcies, judgments or liens.”

It remains unclear whether the law bans only inquiries, but not public record searches, for bankruptcies, judgments or liens. Under the SCDEA, a consumer credit report includes “any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity or credit history,” and given the broad scope of “any  written or other communication of any information by a consumer reporting agency” caution should be taken regarding these searches and even for civil litigation, as such public records may reveal credit-related information that New York City employers are prohibited from using.

While the SCDEA generally establishes eight categories of exemptions, such as those of individuals required to be bonded under city, state, or federal law which are self-explanatory, there has been much speculation as to the scope of others. In its FAQs, the guidance specifically provides that the exemptions do not cover most low-level employees including, but not limited to, bank tellers, cashiers, salespeople, clerical workers, administrative staff, restaurant/bar workers, and private security employees.

Interpretation about non-clerical positions having regular access to trade secrets is also included in the guidance. The SCDEA defines “trade secrets” as “information that: (a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means, by other persons who can obtain economic value from its disclosure or use; (b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and (c) can reasonably be said to be the end product of significant innovation.”

The SCDEA limits the trade secret definition to exclude “general proprietary company information such as handbooks and policies” and “access to or the use of client, customer, or mailing lists.” Consistent with this definition and the broad scope of the NYCHRL, “trade secrets” do not include information such as recipes, formulas, customer lists, processes, and other information regularly collected in the course of business or regularly used by entry-level and non-salaried employees and supervisors or managers of such employees.

The guidance emphasizes that all exemptions to coverage under the SCDEA’s anti-discrimination provisions are to be construed narrowly. Employers may claim an exemption to defend against liability, but they have the burden of proving the exemption by a preponderance of the evidence. No exemption applies to an entire employer or industry–exemptions apply only to positions or roles, and not to individual applicants or employees. The law does permits employers to request credit information in response to any lawful subpoena, court order, or law enforcement investigation.

An employer claiming an exemption must show that the position or role falls under one of the eight  general position categories referenced previously. Employers availing themselves of the exemptions should inform applicants or employees of the claimed exemption, and should also keep a record of their use of such exemptions for a period of five years from the date an exemption is used. Keeping an exemption log will help the employer respond to the Commission’s requests for information.

The guidance sets forth civil penalties for violations of the law (up to $250,000 for willful, wanton, or malicious violations, and up to $125,000 for other violations) in addition to other remedies available under the NYCHRL.

Read the SCDEA, N.Y.C. Admin. Code §§ 8-102(29), 8-107(9)(d), (24); Local Law No. 37 (2015)

Access the interpretive guidance, FAQs and other information about the credit check law here.

 

September 23rd, 2015|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

Do you know about specialty consumer reports?

Credit reports are a part of life, whether applying for a credit card or purchasing a home. But what about specialty consumer reports?

Many people are unaware that dozens of other types of consumer reports exist, filled with information about medical and prescription history, for example, or insurance claims. Specialty consumer reports gather data from a wide variety of sources including information provided by consumers on applications (such as an apartment lease or a wireless phone contract) as well as public documents like criminal records and marriage licenses.

The reports provide information geared for a specific industry. A truck driving company might purchase reports that detail a job applicant’s driving record and motor vehicle insurance claims while an insurer will review a report with claims filed by a homeowner to check an individual’s historic use of insurance policies. Other niche reports provide data on loan balances, information about any bounced checks, and bank account history for lenders; another company tracks consumers’ product returns and will alert large retailers for fraud prevention purposes.

The Fair Credit Reporting Act (the “FCRA”) entitles consumers to one free report per year from any nationwide credit or specialty reporting agency (plus another free report if an adverse action has been taken, or the consumer disputes an item in the report that was corrected).

Recently, consumer rights group Consumer Action focused on the issue of specialty consumer reports in an “Insider’s Guide to Specialty Consumer Reports: A Guide to Obtaining, Understanding and Managing Your Information,” complete with a directory of furnishers. Staffers went through the process of requesting their own reports to help provide information for consumers about the types of reports available and their rights to request reports or correct errors.

Access the Consumer Action guide.

Read the directory of specialty consumer report furnishers.

May 8th, 2015|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

Proposed federal bill bans credit checks in employment decisions

Introduced by Senator Elizabeth Warren (D-Mass) on December 17, 2013, the “Equal Employment for All Act” (S. 1837), would amend the Fair Credit Reporting Act to prohibit employers from requiring or suggesting that applicants disclose their credit history, from procuring a consumer or investigative report, and from disqualifying employees based on a poor credit rating, or information on a consumer’s creditworthiness, standing or capacity. Positions that require a national security clearance or “when otherwise required by law” are exempt from the prohibition. Ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington) already have enacted legislation that limits the use of credit reports for employment purposes.

January 17th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , |

CFPB’s database is now searchable by state and includes complaints about credit reporting

On May 31, 2013 the Consumer Financial Protection Bureau (“CFPB”) announced that its Consumer Complaint Database, now searchable by state, has been expanded to include credit reporting and money transfer complaints. In addition to these two new categories, the database, which can be accessed at http://www.consumerfinance.gov/complaintdatabase/, includes complaints relating to credit cards, mortgages, student loans, bank accounts and services, and consumer loans.

When submitting a complaint about credit reporting, consumers can select from five common issues, which are all searchable on the updated database: incorrect information on a credit report; problems with a credit reporting agency’s investigation; improper use of a credit report; not being able to get a credit report or credit score; and problems with credit monitoring or identity protection services.

June 20th, 2013|Categories: Compliance Corner for Employment Decisions|Tags: , , |

Colorado joins list of states that restrict credit report use for employment

Although the FCRA allows employers to consider credit reports for employment purposes, state laws that are more protective of employee rights trump the federal law. Eight states (California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington) and at least one locality, the City of Chicago, limit the employers’ consideration of credit history in personnel decisions. And Colorado was just added to this list with its   S.B. 18 that was signed into law on April 19, 2013. Aggressive legislative efforts are likely to continue. The most restrictive bill yet is pending before the New York City Council. It would prohibit employers from using credit reports in hiring except in few instances where such checks are required by law.

May 6th, 2013|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

Vermont is the latest state to restrict credit reports in employment decisions

Effective July 1, 2012, Vermont will be the eighth state to regulate the use of credit-related information for employment purposes. Although similar in many ways to laws already enacted in California, Connecticut, Hawaii, Illinois, Maryland, Oregon and Washington, Vermont’s requirements under Act No. 154 exceed those of other state laws as they prohibit even exempt employers from using an applicant or employee’s credit history as the “sole factor” in employment decisions. Additionally, Vermont exempt employers who take adverse action based in part on a credit history must return the report to the individual or destroy it altogether. Neither the Fair Credit Reporting Act (FCRA) nor any of the other similar state laws imposes such a requirement.

Generally, the Act prohibits employers from inquiring into an applicant’s or employee’s credit report or credit history, and further bans employers from discriminating against or making employment decisions (e.g. hire, fire, alter the compensation or any other term or employment condition) based on a credit report or credit history. Notably, credit history in this context includes credit information obtained from any third party that reflects or pertains to an applicant’s or employee’s “borrowing or repaying behavior, financial condition or ability to meet financial obligations,” even if that information is not contained in a “credit report.”

The trend in restricting credit report use for employment purposes will continue as several other states and the federal government are considering comparable legislation. Soon to follow most likely will be New Jersey. In May 31, 2012, the Senate approved S455 that would prohibit employers from seeking credit checks on employees or applicants under most circumstances. A parallel bill (A2840) was introduced by the Assembly on May 11, 2012, and a similar bill (A704) in December 2011.

July 2nd, 2012|Categories: Compliance Corner for Employment Decisions|Tags: , , , , |
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