New York State to ban most employment-related credit checks beginning April 18, 2026

Beginning April 18, 2026, New York State employers will generally be prohibited from requesting or using an applicant’s or employee’s consumer credit history when making employment decisions. The change stems from Senate Bill S3072, signed into law in December 2025, which amends the New York State Fair Credit Reporting Act and extends restrictions that previously applied only in New York City to the entire state. New York is now one of 11 states that restrict the use of credit history in employment decisions.

This article provides an overview of potential insurance implications from an employment practices liability and fidelity/crime bond (hereafter “fidelity bond”) perspective.

Employment practices liability

The law bars credit checks for hiring, promotion, compensation, discipline, or termination decisions, covering credit reports, credit scores, payment history, bankruptcies, liens and similar financial information. The law defines “consumer credit history” broadly to include credit reports, credit scores, payment history, bankruptcies, liens, collections and financial information obtained directly from the individual, not just traditional credit bureau reports. The prohibition applies to both job applicants and current employees, and it also restricts background screening companies from providing credit history information for employment purposes unless a statutory exception applies.

While the ban is broad, limited exemptions remain for certain roles, including positions required by law to consider credit history, law enforcement and investigative roles, jobs requiring security clearance or bonding, roles with signatory authority over transactions of $10,000 or more and positions with regular access to trade secrets or sensitive systems. Employers relying on an exemption must be able to document and justify its applicability, as exemptions are expected to be construed narrowly.

In light of the new law, employers should review hiring practices, background check policies, job descriptions and vendor relationships to ensure compliance. Improper requests for or use of credit history may constitute an unlawful discriminatory practice under state law and lead to a discrimination claim.

Fidelity bond

While all exemptions warrant careful consideration, employers may seek to rely on the ‘roles required to be bonded under state or federal law’ exemption as many organizations maintain a fidelity bond that covers its employees. In most instances, a fidelity bond is not compulsory and therefore is not required under state or federal law. If the bond is not required under state or federal law, the exemption cannot be applied to circumvent the credit check ban. Below are examples of bonds that are required by federal law:

1. An ERISA bond is required for most employee benefit plans (pension and welfare plans) under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA coverage is often embedded within an organization’s fidelity bond. In other instances, it may be purchased on a stand-alone basis. ERISA bonding protects the plan against losses caused by fraud or dishonesty by individuals who “handle” plan funds. Every person who “handles funds or other property” of an employee benefit plan is required to be bonded, unless covered under an ERISA exemption. According to ERISA, the general criteria for determining “handling” include:

   • Physical contact with cash, checks or similar property;
   • Power to transfer funds from the plan to oneself or to a third party;
   • Power to negotiate plan property (e.g., mortgages, title to land and buildings or securities);
   • Disbursement authority or authority to direct disbursement;
   • Authority to sign checks or other negotiable instruments; or
   • Supervisory or decision-making responsibility over activities that require bonding

   Bonding all persons who “handle” plan funds or other property is a federal law mandated by the Employee Retirement Income Security Act of 1974.

2. FINRA Rule 4360 states that each member required to join the Securities Investor Protection Corporation (SIPC) shall maintain blanket fidelity bond coverage, as specified by the rule. Bonding of all associated persons, officers and employees of the firm is required by FINRA, and while it is not a federal statute enacted by Congress, it is a federal-level regulatory requirement approved by the SEC.
3. Rule 17g-1 of the Investment Company Act of 1940 requires registered investment companies to maintain fidelity bonding against employee “larceny” and “embezzlement.” Bonding of officers and employees of registered management investment companies is therefore required by the SEC as a federal law.

New York State has joined a growing number of jurisdictions in limiting the use of credit history in employment decisions. Applicants and employees may bring a private action against employers that fail to comply. Employers should consult compliance and legal counsel to determine whether any exemptions apply.