New York Restricts the Use of Credit Checks in Hiring

Effective April 18, 2026, New York has significantly limited employers’ ability to use credit information in employment decisions. While credit checks were once a common part of background screening, the new law shifts them from a routine tool to a narrow exception.  

For employers, this is more than a procedural update—it reflects a broader change in how hiring decisions are expected to be made and justified.

If you are reviewing your hiring practices, background check policies, or multi-state compliance strategy, Please contact ILS Team at contact@consultils.com to assess your current processes, identify potential risks, and implement compliant, business-aligned hiring frameworks.

A Shift in the Rules: Credit Checks Are Now the Exception

Under the amended New York Fair Credit Reporting Act, employers are generally prohibited from requesting or using an individual’s consumer credit history when making employment-related decisions, including hiring, compensation, promotion, demotion, and retention.  

The definition of “consumer credit history” is broad. It includes not only credit scores, but also an individual’s overall creditworthiness, payment history, and financial standing. As a result, practices that may have seemed routine—such as incorporating credit-related information into background checks—can now create legal exposure.

The law does, however, allow limited exceptions. Credit information may still be considered where it is directly relevant to the responsibilities of the role. In practice, this typically includes positions that:

• Involve authority over significant funds or assets (generally $10,000 or more)

• Require access to trade secrets or highly sensitive information

• Carry fiduciary responsibilities or authority to enter into substantial financial agreements

• Involve law enforcement, national security, or legally mandated background checks

• Require security clearances, bonding, or oversight of digital security systems

The key question is no longer whether an employer prefers to use credit checks, but whether the role itself justifies their use.

Why This Matters: A Broader Compliance Trend

New York is part of a growing number of jurisdictions that are restricting the use of credit history in employment decisions. States such as California, Illinois, and Washington have already adopted similar limitations.  

For employers operating across multiple states, this creates a practical challenge: hiring practices that are compliant in one jurisdiction may expose the company to risk in another. A uniform, nationwide background check policy is becoming increasingly difficult to maintain.

More importantly, regulators are moving away from allowing employers to rely on broad, indirect indicators of risk—like credit history—and toward requiring decisions to be grounded in factors that are directly tied to job performance and responsibilities.

What Employers Should Do Now

In light of these changes, employers should view this not simply as a restriction, but as an opportunity to reassess their hiring framework more broadly:

• Companies should review their current background screening practices to determine whether credit checks are still being used as a default component. In many cases, these processes were implemented years ago and may no longer align with current legal requirements.

• Employers should take a closer look at job classifications. Only a limited set of roles will qualify for the law’s exceptions, and those determinations should be made deliberately—not applied broadly “just in case.”

• Where credit checks are still used, employers should document the business rationale. In the event of a challenge, the ability to explain why credit information was necessary for a specific role can be critical.

• Companies should consider how to replace credit-based screening with more relevant evaluation methods. Structured interviews, reference checks, and role-specific assessments are often more defensible and more aligned with current regulatory expectations.

The new law reflects a clear shift in regulatory focus: from collecting more information to using only what is necessary and relevant.

For employers, the risk is not simply in whether a credit check is used, but whether its use can be justified based on the nature of the role. Practices that once felt conservative or risk-averse may now carry unintended legal exposure.

Aligning hiring decisions with clearly defined job requirements—and ensuring those decisions can be explained and documented—is now central to managing employment risk in New York.

If you are reviewing your hiring practices, background check policies, or multi-state compliance strategy, Please contact ILS Team at contact@consultils.com to assess your current processes, identify potential risks, and implement compliant, business-aligned hiring frameworks.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

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As Managing Partner at ILS, Richard Liu ranks among the leading U.S. attorneys in corporate, employment, and regulatory law. He is known for crafting legal strategies aligned with clients’ business objectives and advising Fortune 500 companies, startups, and executives on corporate transactions, financing, privacy, and employment matters across the technology, healthcare, and financial sectors.

Before founding ILS, Richard practiced at top defense firms, where he developed a reputation for anticipating risks and designing strategies that balance protection with growth. He has secured favorable outcomes in contract and intellectual property disputes, represented clients in state and federal courts, and is recognized for combining large-firm expertise with boutique-firm agility. Richard is also a frequent speaker at industry and legal conferences.

Email: contact@consultils.com | Phone: 626-344-8949