Massachusetts Legislation Bans Credit Checks: What Employers Should Know

Last month, the Massachusetts House of Representatives passed legislation that would prohibit employers from using credit checks during pre-employment screening. If passed, this legislation would add a new provision to the Massachusetts Consumer Protection Law barring employers from using or obtaining credit checks for employment, promotion, reassignment, or retention. 

This bill, entitled An Act Reducing Barriers to Employment Through Credit Discrimination (H.1434), is expected to pass the Senate and be promptly signed into law by Governor Maura Healy. The proposed legislation would be one of the most restrictive in the country. 

If you employ or hire in Massachusetts, this new legislation will likely impact your hiring and screening practices. Let’s explore what the new Massachusetts legislation entails, what it means for employers like you, and how your organization can prepare for the expected changes. 

What is the Massachusetts Credit Check Ban

Similar to recent Clean Slate and Ban the Box legislation, Massachusetts’ credit check ban aims to create a standard of fair and equal hiring practices throughout the state. The proposed legislation contains several key regulations to reduce potential employment discrimination and create equal opportunities for job seekers. If passed, the law would go into effect January 1, 2025. 

Key Provisions

The proposed bill would amend Massachusetts Consumer Protection Law (G.L. c. 93A). If passed, the bill would prohibit employers from requesting or obtaining true credit reports from consumer reporting agencies, like background check providers or credit bureaus. This law specifically prohibits the following: 

• Using a credit report as a factor in determining eligibility for employment, promotion, reassignment, or retention
• Requiring an applicant or employee to answer questions about the information obtained in a background check report related to credit worthiness, credit standing, or credit capacity
• Requesting an employee or applicant wave these rights under the law

Key Exemptions

In contrast to credit reporting laws in other states, the proposed legislation in Massachusetts contains a list of exemptions. One important thing to note is that the new law would only apply to true credit reports, and would not impact an employer’s ability to run background checks, verifications, criminal record checks, or driving record checks. Let’s take a look at the proposed exemptions: 

• Employers or industries required by federal or state law to use a consumer report for employment purposes (banks, credit unions, etc)
• The rules of self-regulatory organizations (registered securities exchanges and associations)
• Employees and applicants holding positions that require a national security clearance

In addition to the listed provisions and exemptions, the proposed bill contains robust anti-retaliation and anti-discrimination provisions. These provisions prohibit employers from taking adverse action against an individual for engaging in the following conduct: 

• Filing a complaint alleging a violation of the Consumer Protection Law 
• Alleging violations of the new law
• Participating, assisting, giving evidence, or testifying in proceedings concerning a violation of or related to the new law
• Opposing a violation of the new law

How Employers Can Navigate the New Hiring Landscape

If the bill is passed, employers hiring in Massachusetts will need to adapt their practices and processes to comply with this change. Employers in Massachusetts should consider adopting new standards for evaluating potential candidates and employees. The new law proposes a more holistic approach to hiring, and with effective screening practices in place, employers can still evaluate candidates’ suitability without infringing on their privacy or perpetuating bias. 

Here are five actions steps and best practices for employers to prepare for new legislation in Massachusetts: 

1. Evaluate Skills and Experience More Heavily

In order to holistically assess candidates and their suitability for a role, focus on an individual’s work history, professional qualifications, and skill sets related to the responsibilities of the job. Consider utilizing skill assessments, professional reference verifications, and peer reviews to holistically assess individuals for employment. 

2. Implement Structured Interviews

Structured interviews can help your organization create a standardized set of questions that measure a candidate’s competencies and potential for growth. In order to conduct structured interviews, your process should include job analysis, defining requirements, developing lead and probing questions, and determining a grading scale. Structured interviews have been found to be twice as effective as traditional interviewing in reducing the likelihood of an unfit hire. 

3. Leverage Employment, Education, and Professional Verifications

Verifications help hiring managers verify and assess candidate information including education, employment, licensing, and more. Certain roles and industries require professional license verifications, but employment, education, and personal reference verifications can offer organizations a more holistic view of potential candidates and their ability to perform the duties of the role. 

4. Utilize Industry-Specific Screening Standards

In order to meet the unique demands of your industry, consider utilizing industry-specific background check processes. The right screening provider can help you build industry-specific standards for different fields of employment, including staffing, financial, transportation, healthcare, nonprofit, and more. These standards not only help you verify a candidate’s identity and abilities but also ensure your organization’s compliance with industry regulations. 

5. Strengthen Your Background Screening Policy

Although employers in Massachusetts can no longer utilize credit checks, consider strengthening other elements of your background check process such as criminal reports, reference checks, drug screening, employment verifications, and driving record checks. The right screening provider can help you build a policy that meets the needs of your organization and its compliance regulations. 

Verified First Can Strengthen Your Screening Policy and More

Keeping up with changing, complex legislation, like the Massachusetts credit checks ban, while trying to recruit and hire top talent can be challenging. Employment and hiring laws like this will continue to pass around the country, so it’s extremely important that employers stay up to date with local and federal screening requirements. 

Working with an experienced, accredited background screening provider is the best way to comply with regulations, hire qualified candidates, and improve efficiency for your organization. Partnering with a screening company can also eliminate potential bias, ensuring candidates feel fairly treated throughout the hiring process. 

Verified First can help your organization achieve hiring and screening success. Not only do we offer a la carte and industry-specific screening solutions, but Verified First also integrates with 100+ (and counting) talent management solutions so you can easily order, review, and manage background check and drug screening solutions in your chosen HR technology. Verified First is accredited by the Professional Background Screening Association (PBSA), meaning we have the expertise and experience to stay on top of new and developing legislation in every state. 

Start screening today!