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Vermont Credit Reports Restriction Law Effective July 1, 2012

Posted on 6/19/2012 by Nicolas Dufour
In: Show All Categories, Background Screening, | 0 Comments

Posted by Nicolas Dufour, Chief Regulatory Counsel

On May 17, 2012 Vermont Governor, Peter Shumlin, signed into law S.95, making Vermont the eighth state to pass credit reports restriction legislation. This law creates a new restriction on Vermont employers regarding the use of an applicant's/employee's credit history and or credit report. The text of this law states that an employer shall not "Fail or refuse 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 an individual's credit report or credit history; nor inquire about an applicant or employee's credit report or credit history".

An employer is exempt from the above provisions only if one or more of the following conditions are met:

A. The information is required by state or federal law or regulation.
B. The position of employment involves access to confidential financial information.
C. The employer is a financial institution as defined in 8 V.S.A. § 11101(32) or a credit union
    as defined in 8 V.S.A. § 30101(5).
D. The position of employment is that of a law enforcement officer as defined in 20 V.S.A. § 2358,
    emergency medical personnel as defined in 24 V.S.A. §2651(6), or a firefighter as defined
    in 20 V.S.A. § 3151(3).
E. The position of employment requires a financial fiduciary responsibility to the employer or a client
    of the employer, including the authority to issue payments, collect debts, transfer money,
    or enter into contracts.
F. The employer can demonstrate that the information is a valid and reliable predictor of employee
    performance in the specific position of employment.
G. The position of employment involves access to an employer's payroll information.

The law also states that an employer who is exempt from the provisions as defined by the above exceptions, may not use the applicant's or employee's credit history or credit report as the sole factor in a decision regarding employment, compensation, or a term, condition or privilege of employment.

If an employer, who is exempt from the provisions according to the above mentioned exceptions, seeks to obtain an applicant's or employee's credit history or credit report, the employer shall:

(a) Obtain the employee's or applicant's written consent each time the employer
     seeks to obtain the credit report;
(b) Disclose in writing to the employee or applicant the employer's reasons for accessing
     the credit report, and if adverse action is taken based upon information in the credit report,
     disclose the reasons for the action in writing.
(c) Ensure that none of the cost associated with obtaining the credit report is passed on to the
     employee or applicant; and
(d) Ensure that the information in the employee's or applicant's credit report or credit history
     is kept confidential and if, the employee is terminated or the applicant not hired, provide the
     employee or applicant with the credit report or have the credit report destroyed in a secure
     manner ensuring the confidentiality of the information in the report.

Below are some key definitions from the statute:

(1) "Confidential financial information" means sensitive financial information of commercial value that
      a customer or client of the employer gives explicit authorization for the employer to obtain,
      process, and store and that the employer entrusts only to managers or employees
      as a necessary function of their job duties.
(2) "Credit history" means information obtained from a third party, whether or not contained in a
      credit report, that reflects or pertains to an individual's prior or current: (A) borrowing or
      repaying behavior, including the accumulation, payment, or discharge of financial obligations;
      or (B) financial condition or ability to meet financial obligations, including debts owed, payment
      history, savings or checking account balances, or savings or checking account numbers.
(3) "Credit report" has the same meaning as in 9 V.S.A. § 2480(a). § 2480a: (2) "Credit report"
      means 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.
      The term does not include:

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

The link to the new legislation is: http://www.leg.state.vt.us/docs/2012/Acts/ACT154.pdf