Navigating New York State's New Ban on Employment Credit Checks

Effective April 18, 2026, New York State will enforce a new amendment to the Fair Credit Reporting Act that significantly restricts employers from using consumer credit history in employment decisions. This legislation (S03072) aims to remove barriers to employment for individuals with poor credit history, which lawmakers argue is not predictive of job performance.

This ban applies to all employers in New York State, expanding protections that previously existed primarily in New York City.

What is Prohibited?

Employers cannot:

1. Request or obtain consumer credit history for employment purposes.
2. Use credit history when making decisions regarding hiring, firing, promotion, compensation, or other terms of employment.

Definition of "Consumer Credit History"

The law defines this broadly to include credit worthiness, credit standing, or payment history. This covers:

• Consumer credit reports and credit scores.
• Information obtained directly from the individual regarding account numbers, late payments, charged-off debts, or items in collections.
• Bankruptcies, judgments, or liens.

Exemptions: When Can You Check Credit?

The law provides specific, narrow exemptions. You may still request credit history if the position falls into one of the following categories:

• Legal Mandate: Required by state or federal law, or by a self-regulatory organization (e.g., FINRA).
• Law Enforcement: Police officers, peace officers, or investigative roles in government agencies.
• Security Clearance: Roles requiring federal or state security clearance.
• Trade Secrets: Non-clerical roles with regular access to trade secrets, intelligence, or national security information.
• High-Value Financial Authority: Roles with signatory authority over $10,000 or more in third-party funds/assets, or fiduciary roles with authority to enter financial agreements valued at $10,000 or more.
• Digital Security: Roles responsible for modifying digital security systems that protect networks or databases.
• Bonding: Positions required to be bonded under state or federal law.
• Public Trust: Certain appointed positions involving a high degree of public trust.

How to apply the law

The General Rule: Location of Impact (Where the Work is Done)

The law is primarily designed to protect positions located in New York State.

Scenario A: The NY Job 

• Candidate lives in NJ/CT, applying for a job in NY.
• Verdict: The Law always APPLIES where the job is physically located in NY.
• Reasoning: The "impact" of the employment decision (and the discrimination) happens at the place of employment. Non-residents applying for jobs physically based in NY are protected by NY laws.  

Scenario B: The Out-of-State Job 

• Candidate lives in NY, applying for a job in NJ/CT.
• Verdict: The Law generally DOES NOT apply. 
• Reasoning: New York employment laws typically do not have "extraterritorial" reach. If a NY resident commutes to Jersey City for work, they are subject to New Jersey employment laws, not New York's. If the job is 100% located outside of NY state and there is no connection to New York whatsoever (beyond the applicant’s home address), there is a strong argument that New York state law will not apply. However, positions that are (or can be) performed remotely from NY state could be problematic (see “Gray Area” below).  If the job entails working from home, even occasionally, it will likely extend New York law to the position.  It may also be problematic if the job posting or advertising was directed to New York to solicit applicants.  

Scenario C: The Remote Worker (The "Gray Area")

• Candidate lives in NY, working remotely for a company in another state.
• Verdict: The Law LIKELY APPLIES.  
• Reasoning: For a fully remote worker, their "place of work" is their home office in New York. Therefore, they are an employee working in New York State, and the employer must usually comply with NY labor laws (including tax withholding, pay transparency, and background check restrictions) for that specific employee.

Summary

1. If the butt is in a seat in New York, the law likely applies.   

2. If the candidate is moving to New York for the job, apply the law.  

3. If the candidate lives in New York but physically commutes to a different state for work, the law of the work state usually prevails (but check with legal counsel to be safe).  It likely could apply so be cautious.  

For Maximum Risk Management, Consider Restricting Credit For:

(1) All Jobs Physically Located In Ny State (Unless An Exception Applies); And

(2) All Applicants With A Home Address In Ny State.  Applying the restriction to all applicants with a NY State home address will capture the remote employees, the hybrid (or occasional WFH) employees, and applicants who were solicited from NY to go work outside of NY.  Because this results in likely over-compliance, the restriction could be lifted (i.e., the law would likely not apply) in situations where the job is physically and fully located outside of NY (with no WFH ability or coming into NY) and the employer did not solicit applications in NY (online job postings make this tricky) or otherwise create some connection to NY State.  

Frequently Asked Questions (FAQ)

1. Does this ban apply to current employees or just new hires?

The law applies to both. You cannot use credit history for promotion, retention, or compensation decisions regarding current employees.

2. I operate in New York City. How does this affect me?

New York City has enforced the Stop Credit Discrimination in Employment Act (SCDEA) since 2015. If you are compliant with NYC law, you are likely compliant with the new State law, as the exemptions are very similar. However, you should ensure your policies align with whichever law provides greater protection to the employee.

3. Does this prohibit criminal background checks?

No. This legislation strictly prohibits "consumer credit history." It does not restrict criminal background checks, employment verifications, or education verifications.

4. Can I ask the candidate about their credit history during the interview if I don't run a formal report?

No. The law prohibits requesting information directly from the individual regarding their credit accounts, late payments, or bankruptcies, just as it prohibits ordering a formal report.

5. What should I do if I believe a role is exempt?

We recommend documenting your justification for the exemption clearly in the job description. When ordering a background check from us, you may be required to certify that an exemption applies to the specific order.

Disclaimer: This document is for educational purposes only and does not constitute legal advice. We recommend consulting with your legal counsel to review your specific hiring policies and job descriptions.

The information and opinions expressed are for educational purposes only and are based on current practice, industry related knowledge and business expertise. 

If you have any further questions, or need a product enabled on your account, 

please contact Verified First Client Services for assistance at 844-709-2708 or email ClientServices@VerifiedFirst.com