Credit History in Employment: New York Laws & Your Rights

Federal law, the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., governs how employers can use credit reports in hiring decisions. The FCRA applies to all employers that obtain credit reports through third-party consumer reporting agencies. Under the FCRA, an employer must:

(1) Disclose to the job applicant or employee in writing that a credit report may be obtained and obtain the applicant's written consent before requesting the report; (2) provide a copy of the credit report to the applicant if an adverse employment action is taken based on information in the report; and (3) provide a clear and conspicuous notice explaining the applicant's right to dispute the accuracy of the report with the consumer reporting agency.

However, the FCRA does not prohibit employers from using credit checks in hiring decisions. The EEOC enforces the FCRA. Federal law does not restrict which positions can require credit checks—employers have broad discretion to request credit reports, though they must follow FCRA procedures. The FCRA permits remedies including actual damages, punitive damages up to $1,000 per violation, attorney's fees, and costs.

New York law is significantly stronger than federal law in protecting workers from credit-based discrimination. New York General Business Law section 740 is the primary state statute that restricts employer access to credit history and credit reports. Under this statute, employers may only obtain or use credit history or a credit report for employment purposes if:

(1) The position involves access to financial information or financial transactions; (2) the position is in law enforcement, security, or investigative work; (3) the position is a managerial or supervisory role involving significant access to funds or valuables; or (4) the job involves a fiduciary duty or responsibility.

Additionally, New York Executive Law section 296 makes it illegal to discriminate against a job applicant or employee based on credit history, credit report, or credit score. This means that even if an employer is permitted to check credit under section 740, they cannot use the results as the sole basis for denying employment. New York employers must:

(1) Provide written notice at least five business days before requesting a credit report; (2) obtain written consent from the applicant or employee; (3) provide a copy of the credit report and written explanation of how the credit report was used in making the employment decision if adverse action is taken; and (4) allow the applicant or employee to dispute the accuracy of the credit report.

The New York Department of Consumer Affairs and the Division of Human Rights enforce these provisions. State law covers all employers in New York, including those with just one employee, and provides stronger protections than federal law by explicitly limiting the positions for which credit checks are permissible and by making credit-based discrimination an independent violation. Remedies under New York law include compensatory damages, punitive damages, attorney's fees, and injunctive relief.

New York law contains narrow exceptions that permit credit checks in specific circumstances. First, employers may obtain credit reports only for the four permitted job categories listed in section 740: financial access positions, law enforcement and security roles, managerial positions with access to funds or valuables, and fiduciary positions. Employers have the burden to establish that a position qualifies for one of these exceptions—the law is construed narrowly in the employee's favor.

Second, if an applicant or employee explicitly authorizes a credit check, an employer may proceed without the five-business-day notice requirement, though written consent is still required. However, this exception cannot be used to override the substantive restrictions on which positions qualify for credit checks.

Third, small exemptions exist for certain government positions and positions requiring security clearances at the federal level, though this carve-out is limited. Employers in New York cannot use criminal history as a proxy for credit worthiness, and the state has strongly discouraged the use of credit checks even in permissible positions.

Fourth, an employer may use information from a credit report if it bears a direct relationship to the specific job. For example, an applicant for a financial controller position with a history of fraud might be properly excluded. However, general poor credit scores, late payments on personal obligations, or unpaid consumer debts typically do not establish a direct relationship to job performance and cannot be used to deny employment. The New York courts have held that credit-based discrimination violates public policy, making it difficult for employers to defend denials based on credit factors.

Step 1: Document Everything. Keep written records of all communications from your employer or potential employer regarding credit checks. Save any emails, letters, or notices about a credit check. Note the date you received the notice and whether the employer provided the written notice at least five business days in advance. Document your written consent (or lack thereof) and save copies of any credit report you received. If you were denied employment or experienced an adverse action, document the date, the stated reason, and any evidence suggesting credit history was the real reason (e.g., email comments about your credit, lack of job-related qualifications despite credit concerns).

Step 2: Attempt Internal Resolution (Optional but Recommended). If you are still employed, file a written complaint with your employer's Human Resources department explaining that the employer violated New York General Business Law section 740 by checking your credit without proper notice, without written consent, or for an impermissible position. Include copies of your documentation. Request a written response within 10 business days. If the employer acknowledges the violation, ask for remedial action (removal of the adverse decision, reinstatement to consideration, or other appropriate relief). Keep copies of all internal communications.

Step 3: File a Complaint with the New York Division of Human Rights. Visit the New York Division of Human Rights website at https://dhr.ny.gov or call 1-888-296-4636 to file a complaint. You may file in person at the local regional office in your county. You have three years from the date of the violation to file. Provide: (1) your name, address, and contact information; (2) the employer's name, address, and size; (3) the date(s) of the alleged violation; (4) a detailed description of what happened, including whether the credit check was unauthorized, whether notice was not provided, or whether the position did not qualify under section 740; (5) the job title you applied for or held; (6) copies of all written notices, consent forms, or credit reports; (7) evidence of the adverse action (denial of employment, termination, demotion, etc.); and (8) the names of any witnesses. You may also file simultaneously with the EEOC under the federal FCRA at https://www.eeoc.gov or by contacting your local EEOC office.

Step 4: Investigation and Conciliation. The New York Division of Human Rights will investigate your complaint, typically within 30-90 days depending on complexity. The investigator will contact your employer and request documents, witness statements, and the employer's response to your allegations. The investigator may also request copies of job descriptions to verify whether the position actually qualified for a credit check under section 740. You may be asked to provide additional evidence or clarification. Once the investigation concludes, the Division will issue a determination. If probable cause is found, the case moves to conciliation, where a mediator will attempt to negotiate a settlement between you and the employer. If conciliation fails, the case may proceed to an administrative hearing before an Administrative Law Judge.

Step 5: Consult an Employment Attorney. Contact an employment law attorney in New York as soon as you discover the violation, particularly if you were denied employment or terminated. An attorney specializing in discrimination and credit-based discrimination can: (1) evaluate whether your position truly qualified for a credit check; (2) assess whether proper notice and consent procedures were followed; (3) determine if the credit check was used improperly in an employment decision; (4) file complaints on your behalf with multiple agencies simultaneously; (5) negotiate settlements; and (6) represent you at administrative hearings or in civil court. New York law provides for attorney's fees if you prevail, making it more affordable to hire counsel. Many employment attorneys work on contingency or reduced-fee arrangements for discrimination cases.