Maryland Restricts The Use Of Credit Reports For Employment Purposes

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Maryland Employment Credit History Use LawMaryland becomes the fifth state to restrict the use of credit reports for employment purposes.  Maryland along with Hawaii, Illinois, Oregon, and Washington have similar legislation.  Each state has its own caveat on restricted use and employers should be aware of the difference in-which they employ.  A link to a Credit Report – State Legislative Matrix is provided for more information.

Maryland Governor Martin O’Malley signed the Maryland Job Applicant Fairness Act into law on April 12, 2011, and the new law restricts employers from using an applicant/employee's credit report or credit history in determining whether to deny employment; discharge an employee; or determine compensation, terms, conditions or privileges of employment.

This law goes into effect on October 1, 2011, and specifies that the employer may request or use the applicant/employee’s credit information after the applicant has received an offer of employment and if the employer has a substantially job-related bona fide purpose for requesting or using information in a credit report or credit history.

Under the act, a position for which an employer has a substantially job-related bona fide purpose for requesting or using information in a credit report or credit history includes a position that: 

  • Is managerial and involves setting the direction or control of a business, or a department, division, unit or agency of a business.
  • Involves access to personal information—as defined in section 14-3501 of the commercial law article—of a customer, employee or employer, except for personal information customarily provided in a retail transaction.
  • Involves a fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money or enter into contracts.
  • Is provided an expense account or a corporate debit or credit card.
  • Has access to trade secrets or other confidential business information. 

Additionally, the new law does not apply to any employer that is: 

  • Required to inquire into an applicant's or employee's credit report or credit history under federal law or any provision of state law for the purpose of employment.
  • A financial institution that accepts deposits that are insured by a federal agency, or an affiliate or subsidiary of the financial institution.
  • A credit-union share-guaranty corporation that is approved by the Maryland Commissioner of Financial Regulation.
  • An entity, or an affiliate of the entity, that is registered as an investment advisor with the U.S. Securities and Exchange Commission. 

The law authorizes an applicant or employee to file complaints with the Maryland Commissioner of Labor and Industry, and Employers found to have violated the act can be fined up to $500 for the first violation, and up to $2,500 for each repeat violation.

The Fair Credit Reporting Act (FCRA) authorizes the use of credit report information for employment purposes; however, the proper use of this information within the hiring decision process is imperative to avoid discrimination and legal liability.  As best practice, employers should always review credit report information on an individual basis, per applicant, and only as it relates directly to the specific job function.  EBI advises employers to meet with legal counsel to review compliance guidelines on the use of credit reports within their state. 

All information contained herein is provided by Employment Background Investigations solely for the convenience of its clients. EBI is not providing legal advice or counsel and nothing provided within this article should be deemed as legal guidance or advice. Readers should consult with their own legal counsel to determine their legal requirements or if they have questions on any information provided by EBI.

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