New York has joined a growing number of states and local jurisdictions that significantly restrict the use of credit reports in hiring new employees and making employment decisions about current staff, including promotions, compensation, and other actions. Ten other states have similar laws: California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. This trend also extends to several local jurisdictions, including New York City, Philadelphia, and Washington D.C., among others, which have their own restrictions. Simply put, in these jurisdictions and, inevitably, future ones, credit reports may only be used for employment-related background checks in very specific situations, not as a blanket check for all positions.
Credit Report Concerns and Limitations
Critics of using credit reports in employment decisions point out several concerns: these practices can disproportionately affect low-income communities and communities of color, have a weak correlation with actual job performance, and may be based on inaccurate credit reports. Additionally, economic hardships—such as medical debt or the impact of the pandemic—may unfairly influence perceptions of an individual’s work ethic and capability, even though these challenges are unrelated to job performance.
On April 18, 2026, New York Senate Bill S3072 will go into effect. According to the New York State Senate website, the bill’s purpose is to “prohibit an employer or potential employer from using a job applicant or employee’s consumer credit report in their decision to hire, terminate, promote, demote, discipline, compensate, or in setting the terms, conditions, or privileges of employment.” This means that the law will apply not only to new hires but also across much of the employment lifecycle.
When Employers Can Use Credit Information
As with similar laws, there are exceptions. As summarized by the law firm Seyfarth Shaw, employers may request or use credit information in the following situations:
- The employer is required to obtain or consider credit information under state or federal law, or by a self-regulatory organization as defined in the Securities Exchange Act of 1934.
- The position is for a peace officer, police officer, or another law enforcement or investigative role within a governmental agency.
- The role is an appointed position that must undergo a state-required background investigation and involves a high degree of public trust.
- The position requires the employee to be bonded under state or federal law.
- The role requires a federal or state security clearance.
- The position is non-clerical and involves regular access to trade secrets, intelligence information, or national security information.
- The individual has signatory authority over $10,000 or more in third-party funds or assets, or holds a fiduciary role permitting them to enter financial agreements of $10,000 or more on the employer’s behalf.
- The role includes regular duties that involve modifying digital security systems that protect the employer’s or its clients’ networks or databases.
Unless one of these exemptions apply, employers may not request credit history on a consumer. The law defines “consumer credit history” as a consumer credit report, credit score, or information obtained directly from an individual about credit accounts, bankruptcies, judgments, or liens. As with other jurisdictions, these exemptions will likely be narrowly construed, and employers will need to defend their decision to request and use this information. Documenting these legal exceptions should be strongly considered.
Potential Impact of Credit Information Restrictions
New York City employers are already familiar with such restrictions, outlined under the “Stop Credit Discrimination in Employment Act.” However, this new law may have an even broader impact. According to the law firm Littler Mendelson, “an individual who lives in New York but applies for a position in another state whose credit history is obtained for employment purposes may be covered by the New York credit history discrimination law.” These laws, in light of the ever-growing patchwork of rules, can be even more challenging for multi-state employers, which is why many organizations appear to be moving away from requiring credit checks for employment.
Employers should consult legal counsel to ensure their background checks comply with this and other relevant laws. Given the national trend toward limiting credit reports for employment background checks, even employers not currently affected should take a cautious approach to requesting credit information, and only do so when clearly applicable to the position.
