New York State Prohibiting Use Of Credit History For Employment Purposes

On April 18, 2026, recent amendments to the New York State Fair Credit Reporting Act will go into effect, making it an unlawful discriminatory practice for employers statewide to inquire about or use an applicant's or an employee's consumer credit history for employment-related purposes, subject to narrow exceptions. Employers should prepare accordingly.

New Statewide Restrictions on Employers' Use of Credit Information

The recent amendments to the New York State Fair Credit Reporting Act (“NY FCRA”; Gen. Bus. Law § 380 et seq.) will effectively bring state law into general alignment with restrictions already imposed on New York City employers, under that locality's Stop Credit Discrimination in Employment Act (“SCDEA”). Ten other states have comparable laws on the books – California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington.

As amended, the NY FCRA places significant restrictions on employers' use of consumer credit history. For purposes of the law, “consumer credit history” is defined broadly as an individual's “credit worthiness, credit standing, credit capacity or payment history, as indicated by:

(1) consumer credit report; (2) credit score; or (3) information an employer obtains directly from the individual regarding,

(i) details about credit accounts, including the individual's number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit or prior credit report inquiries, or (ii) bankruptcies, judgments or liens.”

Starting on April 18, 2026, it will be unlawful under the NY FCRA for an employer, labor organization, employment agency, or any of their agents to request or use the consumer credit history of an applicant for employment or of an employee, or to “otherwise discriminate” against an applicant or employee regarding “hiring, compensation, or the terms, conditions or privileges of employment based on the consumer credit history of the applicant or employee.”

Prospective and actual employees will have a private right of action against employers that negligently fail to comply with the new law, and those individuals may recover actual damages and reasonable attorneys' fees, but not punitive damages (even in cases of willful noncompliance by the employer).

Exemptions from the New Prohibitions

The updated NY FCRA sets forth eight categories of exceptions to the general employer ban on using consumer credit history, meaning that employers may lawfully inquire into or make use of such information under the statute with respect to the following positions:

1. Positions as to which state or federal law, or a self-regulatory organization, mandates that the employer inquire about or use the credit history;
2. Police officers, peace officers, or other roles with law enforcement or investigative functions in law enforcement agencies;
3. Appointed positions requiring a high degree of public trust and a background investigation by a state agency;
4. Positions requiring bonding under state or federal law;
5. Positions requiring a federal or state security clearance;
6. Non-clerical positions entailing regular access to trade secrets, intelligence information, or national security information, as such terms are defined in the law;
7. Positions with signatory authority of $10,000 or more in third-party funds or assets, or involving fiduciary responsibility and authority to enter financial agreements on the employer's behalf valued at $10,000 or more; and
8. Positions whose regular duties permit the employee to modify digital security systems preventing unauthorized use of the employer's or its clients' networks or databases.

Next Steps for Employers

New York State employers should evaluate their hiring and ongoing employment processes in order to ensure compliance with the new law.

Employers should also:

1. educate and retrain HR personnel and hiring managers on the new restrictions and applicable exceptions;
2. update HR and employment manuals with regard to application, hiring, compensation, promotion/demotion, and other employment procedures and decisions; and
3. be on the lookout for forthcoming guidance from the state agencies enforcing the amended law.

Notably, the NY FCRA expressly provides that it does not preempt existing protections under any local law. Accordingly, to the extent that the SCDEA provides greater protections to applicants or employees than the new state law does, employers in New York City will need to continue to comply with those more stringent, preexisting legal restrictions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.