New York Becomes the Eleventh State to Restrict Employers’ Use of Credit History in Hiring
- myHRscreens Expert
- Feb 5
- 4 min read
New York has joined a growing number of states limiting when and how employers may consider an applicant’s or employee’s credit history in employment decisions. On December 19, 2025, New York Governor Kathy Hochul signed into law S03072, amending the New York Fair Credit Reporting Act. This law will go into effect on April 18, 2026.
As the eleventh state to enact such restrictions, New York’s move reflects a broader shift in how credit information is viewed within the hiring process, particularly as it relates to fairness, equity and job-related necessity. For employers operating in New York or across multiple jurisdictions, this development reinforces the importance of reassessing hiring practices and ensuring compliance with evolving state and local employment laws.
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Understanding Credit History in the Hiring Context
Historically, some employers have used credit reports as part of pre-employment background checks, particularly for roles involving financial responsibility, access to sensitive data or fiduciary duties. The rationale has been that credit history may offer insight into an individual’s financial reliability or risk exposure.
However, credit history is increasingly viewed as an imperfect and potentially problematic screening tool. Credit reports may reflect circumstances unrelated to job performance, such as medical debt, student loans or economic disruptions. As a result, lawmakers and regulators have raised concerns about whether the use of credit history in hiring unfairly disadvantages certain groups of applicants.
New York’s Restrictions on Credit History Use
Under New York’s law, employers are generally prohibited from requesting or using an applicant’s or employee’s consumer credit history when making employment decisions. The restriction applies broadly, with limited exceptions for certain roles where credit history may be demonstrably job-related or legally required.
These exceptions typically apply to positions involving significant financial authority, law enforcement responsibilities or access to highly sensitive financial information. Even in these cases, employers must proceed carefully and ensure that any use of credit history aligns strictly with the permitted criteria under the law.
Statutory Exemptions
Like similar laws enacted in other jurisdictions, the New York statute includes several narrowly defined exemptions to its general prohibition on the use of consumer credit history in employment decisions. These exemptions largely align with those found in the New York City Stop Credit Discrimination in Employment Act (SCDEA), and apply only in limited circumstances where credit history may be deemed legally required or directly job-related.
Specifically, the law does not apply to employers who are required by state or federal law, or by a self-regulatory organization, to consider credit history; applicants for law enforcement or peace officer roles; individuals subject to state-mandated background investigations for positions involving a high degree of public trust; roles that require bonding or security clearance under state or federal law; non-clerical positions with regular access to trade secrets, intelligence, or national security information; positions involving signatory authority over third-party funds or assets of $10,000 or more, or fiduciary authority to conduct financial transactions of the same value on behalf of the employer; and roles in which an employee’s regular duties permit modification of digital security systems.
As with the exemptions under the New York City SCDEA, these carve-outs are expected to be interpreted narrowly by courts and state agencies, reinforcing the statute’s overall intent to limit the use of credit history in hiring.
A Growing National Trend
New York’s action is not isolated. Over the past several years, multiple states and municipalities have enacted similar laws restricting or banning the use of credit history in employment decisions (including California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington, as well as New York City; the District of Columbia; Chicago; Cook County, Illinois; Madison, Wisconsin; and Philadelphia, Pennsylvania). While the scope and exceptions vary by jurisdiction, the underlying policy rationale is consistent: credit history should not serve as a general proxy for trustworthiness or job suitability.
This trend creates an increasingly complex compliance landscape for employers, particularly those with operations in multiple states. A practice that may be permissible in one jurisdiction could be prohibited in another, increasing the risk of unintentional noncompliance.
Moving Toward Job-Related and Consistent Screening Practices
As laws continue to limit the use of credit history, employers are increasingly encouraged to focus on screening tools that are directly related to job requirements. Criminal background checks, employment verification, education verification and skills-based assessments are often viewed as more relevant and defensible when aligned with business necessity.
Employers that proactively adapt to these changes may not only reduce compliance risk but also strengthen their overall talent acquisition strategies by widening applicant pools and promoting fair hiring practices.
Looking Ahead
New York’s decision to restrict employers’ use of credit history underscores a broader reevaluation of traditional hiring criteria. As more jurisdictions adopt similar measures, employers should expect continued scrutiny of background screening practices and greater emphasis on relevance, consistency and fairness.
Staying informed of state-specific requirements and regularly reviewing hiring policies will be essential for employers seeking to navigate this evolving regulatory environment while maintaining effective and compliant hiring processes.
For more information on how MyHRScreens can support your compliance efforts, contact us today at ccooley@myhrconcierge.com, 855-538-6947 ext. 108. Or, schedule a free consultation below:
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