Is Your Background Check Too Broad? New D.C. Law Bans Requests for or Use of Credit Information

Credit information is often one component of a comprehensive employment background check. As we have previously reported, employers utilizing background checks performed by a credit reporting agency are subject to a number of notice, consent, and other requirements under the Fair Credit Reporting Act (FCRA). A new D.C. law goes even further than the FCRA, prohibiting employers from inquiring about or using any credit information about prospective or current employees. Under the Fair Credit in Employment Amendment Act, which went into effect March 17, 2017, D.C. employers may not:

(1) require, request, suggest or cause any employee or applicant to submit any credit information;

(2) use, accept, refer to or inquire about credit information, unless an exemption from the law applies; or

(3) take any discriminatory action against prospective and current employees based on their credit information.

As a practical matter, under this law, employers cannot obtain credit information on job applications, in background checks, in interviews, or at any point during the employment relationship. Credit information is defined broadly to include any written, oral, or other communication of information bearing on an employee’s creditworthiness, credit standing, credit capacity, or credit history.

The law exempts only a narrow set of job positions and circumstances:

1. Positions with financial institutions where the position involves access to personal financial information;
2. Positions where the employer is required by D.C. law to collect credit information;
3. Some positions within the D.C. government, such as those in the office of the D.C. Chief Financial Officer;
4. Positions that require security clearance under D.C. law; and
5. Situations where an employer receives credit information through a subpoena, court order, or law enforcement investigation.

As with D.C.’s 2014 Ban-the-Box law, applicants or employees may file an administrative complaint with the D.C. Commission on Human Rights to address violations of the law. The Commission can impose monetary penalties, which go to the complaining party and range from $1,000 to $5,000, based on the number of violations. Unlike the Ban-the-Box law, applicants or employees can also pursue a claim in court, which could make the Act ripe for class action lawsuits.

D.C. employers should contact their background check vendors and remove any credit information inquiries from their onboarding process for applicants and employees in the District. Explicit questions about credit history or even those that might elicit credit information should be removed from job applications, background check authorization forms, and any general employee information forms. D.C. employers also should consider adding a policy to employment handbooks stating that they will not inquire about, use or discriminate based on any credit information and training Human Resources and any individuals responsible for interviewing about the new law’s prohibitions.