Credit checks remain a widely used hiring tool in the financial services industry, especially for roles involving client funds, sensitive data, or fiduciary duties. However, recent changes to how medical debt is reported — combined with evolving legal standards — have introduced new compliance challenges. Employers now face a complex environment shaped by state laws, federal regulations, and court rulings. To reduce risk and stay compliant, hiring teams must reexamine their credit check practices and understand what information is legally usable.
Key Takeaways
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Credit checks are still relevant in financial services but carry significant compliance risks.
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Medical debt reporting has changed, limiting what can appear in credit reports.
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Employers should align their screening practices with both federal law and state-specific rules.
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Training and policy updates are essential for compliant and fair hiring.
Why Credit Checks Matter in Financial Services
Employers in the financial sector conduct credit checks more frequently than other industries. These checks help assess risk for positions involving:
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Access to client or institutional funds
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Handling of private financial data
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Legal obligations related to fiduciary responsibilities
Although useful, credit reports often contain sensitive data. If not handled carefully, they can raise fairness and discrimination concerns. Therefore, employers must ensure their use is targeted, justified, and compliant with relevant laws.
Legal Landscape: Discrimination and Credit Check Restrictions
The use of credit information is governed by federal equal employment laws, including Title VII of the Civil Rights Act of 1964. To comply, employers must apply credit check policies:
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Consistently — across all candidates applying for similar roles
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Justifiably — only when credit information is clearly tied to the role
Additionally, credit checks should not reveal or influence decisions based on protected characteristics such as race, disability, pregnancy, or age.
Several jurisdictions — including California, Illinois, and New York City — have enacted laws limiting the use of credit checks. Typically, exceptions apply to roles where candidates will manage third-party assets, access confidential financial systems, or serve in fiduciary capacities.
The Growing Impact of Medical Debt Limitations
Over the past few years, medical debt reporting has come under greater scrutiny. In response, the major credit reporting agencies — Equifax, Experian, and TransUnion — have made voluntary changes. These include:
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Removing fully paid medical debts
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Excluding debts under $500
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Delaying the appearance of unpaid medical debts for 12 months
Several states, such as New York and Rhode Island, have gone further by restricting or banning the use of medical debt in hiring decisions.
At the federal level, the Consumer Financial Protection Bureau (CFPB) attempted to formalize a ban through its Medical Debt Rule in January 2025. The rule would have blocked both credit bureaus and creditors from including medical debt in consumer reports. However, the rule was vacated by a federal court in Cornerstone Credit Union League v. CFPB, which ruled that the CFPB overstepped its authority under the Fair Credit Reporting Act.
Although the court hinted that state laws might also be preempted, this comment was not binding. As a result, state-level restrictions remain in place for now. Additional legal challenges are likely.
What Employers Should Do Now
To navigate this evolving landscape, financial services employers should take proactive steps:
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Review and update credit check policies regularly
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Ensure consistency in how credit data is evaluated
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Avoid consideration of medical debt where restricted
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Stay current on both federal rulings and state legislation
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Train hiring teams to recognize compliance risks and follow legal best practices
Hiring decisions that rely on credit checks — especially when medical debt is involved — are no longer routine. With growing legal complexity, clear policies and up-to-date training are critical.
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