Illinois recently enacted legislation that broadly restricts a private employer from using credit reports regarding job applicants or current employees. Subject to certain exceptions, an employer may not inquire about, order, or obtain a job applicant’s credit report, or fail or refuse to hire or recruit an individual based on the individual’s credit report or history. With respect to current employees, an employer may not discharge or otherwise discriminate against an employee because of the employee’s credit history or credit report. The law also prevents an employer from requiring an applicant or employee to waive any rights under the new law and prohibits retaliatory and discriminatory acts by the employer. Importantly, the law creates a private right of action for an individual to seek injunctive relief and damages and provides for prevailing-party attorneys’ fees.

The newly-enacted law becomes effective January 1, 2011. Notably, there are a number of exceptions. For example, banks, credit unions, insurance companies, debt collectors, and a variety of other finance-related entities are exempted from the rule.  Law enforcement officers and other state or local government agencies are also exempted. The law also does not apply in a variety of other situations—when:

  • State or federal law requires bonding or other security covering an individual holding the position.
  • The duties of the position include custody of or unsupervised access to cash or marketable assets valued at $2,500 or more.
  • The duties of the position include signatory power over business assets of $100 or more per transaction.
  • The position is a managerial position which involves setting the direction or control of the business.
  • The position involves access to personal or confidential information, financial information, trade secrets, or State or national security information.
  • The position meets criteria in administrative rules, if any, that the U.S. Department of Labor or the Illinois Department of Labor has promulgated to establish the circumstances in which a credit history is a bona fide occupational requirement.
  • The employee’s or applicant’s credit history is otherwise required by or exempt under federal or State law.

The new Illinois law appears to be aimed at protecting individuals whose credit scores have suffered as a result of the financial downturn. The new law would protect an individual who, for example, lost his or her job and was unable to pay some of his or her bills during the period of unemployment. Although an employer could currently request access to the job applicant’s credit report, see the delinquent accounts, and refuse to hire the individual based on this information, as of January 1, 2011, the employer would be prohibited from even requesting the individual’s credit report—unless one of the many statutory exceptions applies. The legislature’s creation of a private right of action and attorneys’ fees provisions signifies the importance of an employer’s compliance with this new law.