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Employment Law Alert – Maryland Restricts Use of Credit Reports by Employers

July 13, 2011

 Maryland Restricts Use of 

Credit Reports by Employers

Maryland has enacted The Maryland Job Applicant Fairness Act (“Act”), which prohibits, in most situations, a Maryland employer from using an individual’s credit report or credit history in making employment-related decisions, including hiring, termination, and determining compensation and other terms of employment.  The penalties for violating the Act are up to $500 for the first violation and up to $2,500 for repeat violations. The Act goes into effect October 1, 2011.


This Act does not apply to an employer that is (i) required by federal or state law to inquire into an applicant or employee’s credit report or credit history for the purpose of employment, (ii) a financial institution that accepts federally insured deposits, (iii) certain credit unions, or (iv) an entity registered as an investment advisor with the U.S. Securities and Exchange Commission.

Employers subject to the Act are permitted to request or use a credit report or credit history:

1.   If an applicant has received an offer of employment and the credit information will not be used for a purpose prohibited by the Act (e.g., will not be used to deny employment or to determine compensation or another term of employment); or

2.   If the employer has a “bona fide” purpose for requesting or using the credit information relating to an applicant or employee if the reason is (a) substantially job-related and (b) is disclosed in writing to the applicant or employee.  The law recognizes that employers will have a bona fide purpose for using the information with respect to positions that:

•  are managerial and involve setting the direction or control of a business, or a department, division, unit or agency of a business;

•  have access to the following sensitive personal information of a customer, employee or employer: social security number, driver’s license number, individual tax identification number, financial account numbers (including credit and debit card numbers), but not including personal information customarily provided in a retail transaction;

•  require fiduciary responsibility to the employer, including the authority to issue payments, collect debts, transfer money, or enter into contracts;

•  are provided an expense account or a corporate debit or credit card; or

•  have access to certain confidential or proprietary information of the employer.

Maryland employers should remember that even if the Act permits requesting or using credit information, they must also comply with the federal Fair Credit Reporting Act and a similar Maryland law when using a third-party provider to obtain credit or other background-check information. Thus, Maryland employers who perform or are considering performing credit or other background checks should review their policies and procedures and update them as necessary so that they are in compliance with these laws.

The contents of this Alert are for informational purposes only, and do not constitute legal advice. If you have any questions about this Alert, please contact a member of the Shulman Rogers
Employment and Labor Law Group  or the Shulman Rogers attorney with whom you regularly work.


Gregory D. Grant

Meredith “Merry” Campbell