March 7, 2023

Banks, credit unions, and other covered institutions must comply with the “fair chance” initiative. This program intends to reduce barriers for people with certain convictions.

The President signed the James M. Inhofe National Defense Authorization Act (NDAA) for the fiscal year 2023. This Act contains fair chance hiring and banking provisions in Section 5705. As a result, covered institutions must comply with new rules for expungements and de minimis offenses. Additionally, the consent application process became more applicant friendly.

Here are some of the critical provisions of the Act:

The Act decreases the scope of crimes subject to Section 205(d) of the Fair Credit Union Act (FCUA) and Section 19 of the Federal Deposit Insurance Act (FDIA). In addition, it addresses the circumstances when requiring written consent for a waiver by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Board (NCUA).

According to the NDAA, individuals no longer need the FDIC’s or NCUA’s consent for older offenses before obtaining employment with an insured bank or credit union. This change also applies to infractions in the following cases:

• Seven or more years have passed since the person committed the offenses;
• Five years or more have passed since the individual’s release from incarceration; and
• The offense happened when the individual was 21 or younger, and over 30 months have passed since the sentence.

The above threshold is lower than the previous law and NCUA and FDIC rules. Furthermore, other de minimis offenses may also become exempt. However, this exemption depends on the rule-making capabilities of the NCUA and whether they meet the criteria below.

• Punishable by a term of three years or less of confinement in a correctional facility;
• For offenses of writing insufficient funds checks, the total face value of the insufficient funds checks must be $2,000 or less, no matter how many convictions or program entries there are;
• Some offenses, such as shoplifting, using a false ID, driving with an expired license or tags, fare evasion, or trespass, if a minimum of one year has elapsed since the conviction or program entry.

With the ability to exempt de minimis offenses, covered financial institutions should find the hiring process for people with minor convictions easier. Additionally, any potentially disqualifying employment standards outlined in Section 19 of the FDIA and 205(d) of NCUA do not apply to candidates with expunged, sealed, or dismissed offenses covered by the law.

The Fair Hiring in Banking provisions define a criminal offense involving dishonesty as an offense. This definition includes when a person either directly or indirectly cheats, defrauds, or unjustly takes someone else’s property in violation of a state statute.

Furthermore, the law maintains that the definition of criminal offenses does not include specific misdemeanors. For example, these misdemeanors include those committed over a year before the individual filed a consent application. However, it excludes any incarceration period and offenses involving the possession of a controlled substance.

The provisions also include rehabilitation standards when considering any consent application by individuals or covered financial institutions. As such, the NCUA and FDIC must conduct an individualized assessment. These assessments must consider the applicant’s age when the conviction or program entry occurred. In addition, it must evaluate the time passed since the conviction or program entry and the relationship of the offense to the position’s job responsibilities.

These agencies must also consider other factors, such as letters of recommendation or the individual’s employment history. More examples include job preparation or educational programs, competition of a substance abuse program, and other relevant mitigating evidence. In addition, regional offices must rely largely on the Federal Bureau of Investigation’s criminal record when reviewing the consent application. They must also supply the applicant with a copy to examine for accuracy.

Banks, credit unions, and other covered institutions should revise their hiring policies to comply with these new provisions. However, keeping up with the background screening regulations can often prove challenging. The best way to ensure compliance with these regulations is to partner with a background company you can trust.

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