New York State Restricts Use of Credit Checks in Employment Decisions
Key Takeaways
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Beginning on April 18, New York employers are prohibited from using credit history information in employment decisions unless financial information is directly relevant to the role.
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Even indirect reliance on credit history may create risk.
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This applies to pre-employment screening and employment-related decisions during the course of employment.
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Failing to comply may lead to statutory penalties, administrative enforcement actions, and private litigation.
Overview
New York has amended the New York State Fair Credit Reporting Act to prohibit most employers from using credit history information in employment decisions. The amended law takes effect April 18, 2026, and applies broadly to hiring, compensation, promotion, and other terms and conditions of employment.
This development expands existing restrictions and reflects a broader regulatory trend limiting the use of screening tools that are not closely tied to job performance. The amended law reflects increasing scrutiny of employment selection criteria. Employers should reassess hiring frameworks to ensure compliance and defensibility under evolving standards.
New York joins ten other states that have enacted legislation concerning the use of consumer credit history in employment decisions, including: California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont, and Washington. Additionally, several major cities, including New York City, Chicago, Philadelphia, and Washington D.C., have also enacted similar restrictions.
What the Amended Law Prohibits
Specifically, employers may not request, require, or use an applicant’s or employee’s credit history in connection with employment decisions, including:
- Credit reports and credit scores,
- Information about bankruptcies, collections, or debt, and
- Payment history and credit account details.
The prohibition applies to both pre-employment screening and employment-related decisions during the course of employment.
Limited Exceptions
The amended law includes narrow exceptions for certain roles where financial information is directly relevant. For example: positions that require security clearance, positions that involve financial authority to enter into agreements of more than $10,000, and positions with regular access to trade secrets. These exceptions are expected to be interpreted narrowly, and employers relying on them should ensure clear documentation.
Key Risks for Employers
A failure to comply may expose employers to statutory penalties, administrative enforcement actions, and private litigation (including discrimination claims). Even indirect reliance on credit history may create risk.
Recommended Employer Actions
Employers should take the following steps before April 18, 2026:
- Audit their hiring and screening practices,
- Update any relevant policies and procedures,
- Review vendor relationships to ensure vendor compliance,
- Train Human Resources personnel and hiring managers, and
- Evaluate job criteria to ensure that the use of credit history (if any) is job-related and defensible.
If you have questions about how this impacts your business, please contact:
- Scott R. Green
- Cali L. Chandiramani
- Christopher P. Maugans
- Caroline J. Berdzik
- Stephen C. Mazzara
- Or another member of the Employment and Labor team