New York Bars Employers From Considering Consumer Credit History in Employment Decisions

Beginning April 18, 2026, all employers in the State of New York will be prohibited from requesting or using an employee’s or prospective employee’s consumer credit history as a factor in employment decisions, subject to certain exceptions. Employers should review their policies and practices to ensure that no employee or prospective employee’s consumer credit history is being used for employment purposes, and document whether certain positions fall under one of the statutory exceptions.

Background

Since 2015, New York City has banned consumer credit checks on existing and prospective employees with limited exceptions. Under the Stop Credit Discrimination in Employment Act (SCDEA), New York City employers are unable to request or obtain information on “credit worthiness, credit standing, credit capacity, or payment history” for employment decisions involving prospective or current employees. On December 19, 2025, New York Governor Kathy Hochul signed into law amendments to the New York State Fair Credit Reporting Act that restrict employers’ use of applicant and employee credit information and make New York State law similar to current New York City law. The amendments take effect on April 18, 2026.
New York is now the 11th state to enact legislation concerning the use of consumer credit history in the hiring process. California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington have all passed laws restricting the use of consumer credit reports in connection with employment decisions. Major cities, including New York City, Chicago, Philadelphia, and Washington DC, have also enacted similar restrictions. 

Amendments to the New York State Fair Credit Reporting Act

Under amended New York law, it is an “unlawful discriminatory practice” for an employer, labor organization, or employment agency to request or use consumer credit history for employment-related decisions, such as hiring, compensation, promotion/demotion, and retention. “Consumer credit history” is defined as “an individual’s credit worthiness, credit standing, credit capacity or payment history,” as indicated by a consumer credit report, credit score, or information provided to employers directly from the employee or applicant regarding details about number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit or prior credit report inquiries, bankruptcies, judgments, or liens. 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.”

As amended, the New York Fair Credit Reporting Act coverage is broad: it protects both applicants for employment and current employees. All New York employers, regardless of size, are subject to the amended Act’s restrictions.

New York law outlines several exemptions from the general prohibition. Employers may consider consumer credit history for employment purposes in the following circumstances:

• Where the employer, or agent thereof, is required by state or federal law, or a self-regulatory organization, to use an individual’s consumer credit history for employment persons.
• Where the individual is applying for or is employed in any of the following positions:
• “Non-clerical positions” with “regular access” to trade secrets (not including client and customer mailing lists), national security information, or intelligence information;
• Positions with signatory authority over third-party funds or assets of $10,000 or more;
• Positions involving a fiduciary responsibility to the employer with the authority to enter financial agreements involving $10,000 or more on behalf of the employer;
• Law enforcement or an investigative role in a law enforcement agency (including applicants for peace officer or police officer positions);
• Positions subject to background investigation by a state agency, provided the state agency does not use consumer credit history information for employment purpose (though it may for appointed positions involving a high degree of public trust);
• Positions requiring that the employee be bonded under state or federal law;
• Positions requiring security clearance under federal law or state law; and
• Positions involving regular modification of digital security systems protecting employer or client networks or databases.

State and local agencies and non-governmental employers will be subject to requests for information from the Division of Human Rights regarding their use of any of the eight exemptions above. Employers should therefore keep accurate and up-to-date records of their consumer credit history usage for employees falling into one of the above categories.

Trade Secrets Exception

As noted above, New York law provides an exception for “non-clerical positions” with “regular access” to trade secrets. The amendments do not define “non-clerical positions,” and thus it is unclear which specific positions this exception applies to. The amendments do contain a specific definition of “trade secrets” that may differ from the definition of trade secrets contained in an employee handbook or employment agreement. “Trade secrets” are defined as information that: (i) “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”; (ii) “is the subject of efforts that are reasonable under the circumstances to maintain its secrecy”; and (iii) “can reasonably be said to be the end product of significant innovation.” The term “trade secrets” does not include general proprietary company information such as handbooks and policies. The term “regular access to trade secrets” does not include access to or the use of client or customer mailing lists.

Local Law Considerations

The amendments specify that employers are required to comply with any local law, ordinance, or regulation concerning the use of consumer credit history for employment purposes if such law, ordinance, or regulation affords an employee or applicant greater protections than New York state law affords.

While New York City similarly restricts the use of consumer credit history in making employment decisions, New York City law is narrower in its exemptions. For example, New York City’s exemptions for positions involving $10,000 or more in funds or assets and positions involving digital security systems only apply to executive-level positions with control over a company’s finances or computer system, respectively. By contrast, the New York State Fair Credit Reporting Act’s new exemptions cover any position involving such duties.

Key Takeaways for Employers

• Employers operating in New York state should review their policies and practices to ensure that no employee or prospective employee’s consumer credit history is being used for employment purposes as of April 18, 2026, unless allowed under one of the specific exceptions.
• Consult with counsel regarding whether certain positions fall under the trade secrets exception.
• Employers should maintain records on the usage of the Act’s new exemptions.
• New York employers operating in cities or states with similar restrictions should consider the differences between the New York State Fair Credit Reporting Act and other applicable law(s), such as level of protection afforded employees, to ensure compliance in every jurisdiction.