Vermont Bans Use of Credit Checks in Employment Decisions

Some states and cities have introduced and passed bills to place restrictions on using credit checks for employment purposes. Generally, these laws restrict when or how employers use credit history for most employment decisions. These laws could have an impact on the way you conduct background screening. They could also require a cautious approach as to when credit information may be considered.

We’ve covered laws that restrict the use of credit history for employment purposes in Rhode Island, Philadelphia, and New York City. So how does Vermont restrict the use of credit information in the hiring process? Let’s look at what Vermont’s credit report law has to say.

Vermont Taps Multiple Definitions of Credit Information

Vermont defines credit information as more than just reports from credit bureaus. In fact, the state restricts use on two types of data.

1. Credit report

Vermont state law defines a credit report as: “Any written, oral, or other communication of any information by a credit reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, including an investigative credit report.”

But Vermont also specifies what a credit report is not. A credit report is not:

• A report containing information solely as to transactions or experiences between the consumer and the person making the report.
• An authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device.

2. Credit history

Vermont defines credit history as details that go beyond a credit report. Credit history includes information collected from a third party, whether or not in a credit report, that reflects on an individual’s prior or current:

• Certain borrowing or repaying behavior.
• Financial condition or ability to meet financial obligations. This includes information on debts owed, payment history, savings or checking account balances, or savings or checking account numbers.

When Vermont Bans Credit History Checks

With some exceptions, employers in Vermont can’t:

• Use a candidate’s credit history or credit report to make employment decisions. This includes failing to hire or recruit, discharge, or otherwise discriminate against an individual with respect to employment, compensation, or a term, condition or privilege of employment because of the individual’s credit report or credit history.
• Inquire about a candidate’s credit report or credit history.

There are some exceptions to this. Employers are exempt from the credit report and credit history restrictions if:

• Credit report or credit history information is required by state or federal law or regulation
• The position involves access to confidential financial information
• The employer is a financial institution or credit union, as those terms are defined by state law
• The role is for a law enforcement, emergency medical personnel, or firefighting position, as those terms are defined by state law
• The position requires financial fiduciary responsibility to the employer or client of the employer
• The employer can show credit information is a valid and reliable predictor of employee performance in the specific position of employment
• The position involves access to an employer’s payroll information

So you meet one of the criteria? Great! Keep in mind that even with an applicable reason, employers can’t use credit history or credit reports as the sole factor for decisions regarding employment, compensation, or a term, condition or privilege of employment.

Vermont’s Unique Credit-Related Disclosure

Employers that may get credit reports or credit history may still want to proceed cautiously. The state places additional restrictions on employers when obtaining credit reports or credit history. In Vermont, employers seeking credit reports or credit history must get written consent from the candidate each time. Employers must also disclose, in writing, the reason the employer is accessing the information. In addition to the written disclosure, the employer must:

• If adverse action is taken based upon credit history or a credit report, provide the reason(s) in writing for taking the adverse action
• Allow the candidate to contest the accuracy of information
• Ensure the costs of the credit check aren’t passed on to the candidate
• Keep all credit information confidential
• Return the credit history or credit report to the candidate, or destroy the credit information in a secure manner, if the candidate is not selected or no longer employed

Verified Credentials provides clients with state-specific sample disclosure documents in their Resource Library. The library includes a sample Vermont Credit Report Disclosure.  If you’d like to see a sample to reference as you create your own document, log into your Resource Library.

If you hire in the state of Vermont, you may want to work with your trusted legal counsel to understand how this law applies to you. Beyond Vermont, laws may vary from state to state, and city to city. Employers nationwide should be mindful of the varying requirements and bans related to credit checks.