New Maryland Law Affecting Employers: Use of Credit Reports

Maryland adopted House Bill 87 which regulates the use of credit reports by employers in their state. The bill follows the general pattern of the State of Illinois and includes exemptions for certain employers and certain categories of positions within any company but the exemptions are different than those adopted by Illinois.

User Restriction, Credit Reports MD Code, Labor and Employment 3-711, effective October 1, 2011 restricts the use of credit reports as follows:

An employer may not use a credit report of an applicant or employee to:

  • deny employment
  • discharge an employee
  • determine compensation or the terms, conditions, or privileges of employment

If a credit report may be ordered under this statute, an employer may request the credit report on an applicant after an offer for employment has been made.

A credit report may be used for bona fide purposes that are substantially job related and if the obtaining of a credit report is disclosed to the applicant or employee in writing. (Note this can be in the FCRA disclosure and authorization form).

The restriction against the use of credit reports does not apply to the following employers:
1. Where a federal or state law requires inquiry into an applicant’s or employee’s credit report.
2. A federally insured financial institution including any affiliate or subsidiary thereof.
3. Credit Union Shared Guaranty Corporation approved by the Maryland Commissioner of Financial Regulation; or
4. An entity registered as an investment advisor by the U.S. Securities and Exchange Commission.

The following positions in any company are deemed to be such that a credit report is substantially related to the job:
1. A manager of a business, department, division, unit or agency.
2. Those having access to personal information of a customer, employee or mployer (except customer information supplied in a typical retail transaction is not included).
3. A position having a fiduciary responsibility to the employer, including the issuance of payments, collecting debts, transfer of money or entering into contracts on behalf of the employer.
4. An employee having an expense account or corporate debit or credit card.
5. An employee with access to a formula, pattern, computation, program, device, method, technique or process that (a) is a business secret and the one who discloses could obtain economic value therefrom and (b) the employer maintains reasonable procedures to keep the information secret.
6. An employee who has access to other confidential business information.

The Bill specifically authorizes other types of consumer reports for background screening permitted under the FCRA.

The Bill has penalties for any employer who violates this provision.

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