Credit Checks in Hiring: Key Issues for Financial Services Employers After Medical Debt Reporting Restrictions

Takeaways

• Credit checks remain a critical but legally complex hiring tool in the financial services sector, requiring consideration of federal and state laws.
• Employers should be aware of new limits on the reporting and use of medical debt information.
• Employers should regularly review credit check criteria, monitor jurisdiction-specific restrictions, and train hiring personnel to comply with state and federal law.

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Evolving credit checks requirements means employers in financial services are challenged more than ever to stay current because they conduct credit checks on prospective candidates more frequently than those in many other industries. Even beyond roles where credit checks are legally required, financial services employers often rely on them to address concerns about access to client funds, fiduciary duties, and sensitive financial data.

Consideration of a candidate’s credit history has always been complex, filled with judgment calls, heightened scrutiny, and a patchwork of differing rules across jurisdictions. Employers also need to be mindful of fairness, consistent application of policies, and anti-discrimination laws. For financial services employers, the latest legal developments over the reporting of medical debt by consumer reporting agencies adds another layer to navigate and may have hiring implications.

EEO Considerations

Federal EEO guidance on credit checks is grounded in Title VII of the Civil Rights Act of 1964 and often overlaps with state and local anti-discrimination laws. In line with this guidance, employers must limit use of credit information to where it is job-related and consistent with business necessity:

• Consistency: Credit check policies must be applied uniformly.
• Relevance: Decisions should be tied directly to legitimate business needs.

Employers should also avoid considering any non-job-related information about protected characteristics that could be revealed through a credit check.

Several jurisdictions (including California, Illinois, and New York City) restrict the use of credit checks except in narrow circumstances. Typical exceptions directly relevant to the financial services sector apply to positions with signatory authority over third-party funds or assets, access to highly confidential financial information, or fiduciary responsibilities.

The Medical Debt Challenge

Medical debt has recently drawn heightened scrutiny. 

In response, both industry and state lawmakers have acted. Since 2022, the three major nationwide credit reporting agencies (Equifax, Experian, and TransUnion) have voluntarily reduced the reporting of medical debt by:

• Removing paid medical debts;
• Omitting debts under $500; and
• Delaying reporting of unpaid medical debts until they are at least one year delinquent.

Some states, including New York and Rhode Island, have enacted statutes that restrict or prohibit the reporting or use of medical debt in employment or credit determinations.

At the federal level, however, the Consumer Financial Protection Bureau (CFPB) has faced setbacks. In January 2025, the CFPB issued its “Medical Debt Rule,” which would have barred both credit bureaus and creditors from including or considering medical debt in consumer reports. Just months later, a federal court in Texas vacated the rule in Cornerstone Credit Union League v. CFPB, finding that the agency exceeded its authority under the Fair Credit Reporting Act. Although the court suggested that state medical debt bans might also be preempted, that statement was dicta and not binding. For now, state restrictions remain intact, although litigation is expected.

Implications

Employers should take steps to ensure compliance with local, state, and federal anti-discrimination laws such as the Americans with Disabilities Act, Pregnant Workers Fairness Act, and Genetic Information Nondiscrimination Act. Employers should also be mindful of their confidentiality obligations under these laws.

These developments underscore that credit checks in hiring, particularly when medical debt is involved, are no longer a straightforward compliance exercise. Recent court decisions, conflicting state laws, and heightened EEO considerations are reshaping what information employers can permissibly use, and how they must approach the process to mitigate legal risk.

As federal litigation continues and states adopt differing approaches, credit checks in hiring will remain a complex compliance challenge for financial services employers. Now is the time to review your credit check policies, update training, and ensure your hiring practices align with evolving federal and state requirements.

Our team is closely monitoring developments, including further CFPB actions and ongoing litigation. Reach out to your Jackson Lewis attorney now for support in implementing compliant, business-focused strategies that reduce risk while maintaining effective hiring practices.