On August 10, 2010, Illinois Governor Pat Quinn signed into law the Illinois Employee Credit Privacy Act (ECPA). When it goes into effect on January 1, 2011, the ECPA will significantly limit the ability of most Illinois employers to obtain credit history information for applicants and current employees, except in limited circumstances.

The ECPA was enacted as a reaction to the economic downturn and its potentially negative impact on employees' credit histories. In the words of Governor Quinn, "[W]e don't want people who battled that recession who are living check-to-check every month to be harmed when it comes to getting employed."

The only employers with a clear-cut exemption from the ECPA are law enforcement agencies, financial institutions, debt collectors, and insurance and surety businesses. The ECPA does, however, permit credit history inquiries by other types of employers if they are related to a "bona fide occupational requirement" of a particular position or group of employees. These limited exceptions exist for jobs that involve the following:

• Bonding or security required by state or federal law
• Unsupervised access to cash or certain assets valued at $2,500 or more
• Signatory power over business assets of $100 or more per transaction
• Managerial duties that involve setting the direction or control of the business
• Access to personal, financial or confidential information; trade secrets; or state or national security information.

A credit history inquiry is also permitted when the employee's or applicant's credit history is otherwise required by, or allowed under, state or federal law.
 
The ECPA applies only to inquiries about credit information. As defined in the act, "credit history" refers to information about an individual's "past borrowing and repaying behavior, including paying bills on time and managing debt and other financial obligations." According to the ECPA, a "credit report" refers to information obtained from a consumer reporting agency regarding "a consumer's creditworthiness, credit standing, credit capacity or credit history." Presumably, therefore, the ECPA does not prohibit employers from conducting background checks as long as they do not include an inquiry into credit information. For instance, inquiries into an individual's criminal background, driving record, educational history and employment references may still be used for valid, non-discriminatory employment purposes.

The new Illinois law does not alter the current requirements of the federal Fair Credit Reporting Act (FCRA). Therefore, even if an ECPA exception applies, the employer must still comply with the FCRA's authorization and disclosure requirements when using a credit reporting agency to obtain credit information. Therefore, it may be a good idea for employers to amend their FCRA authorization forms to include language disclosing that the information is being sought under one or more of the applicable ECPA exceptions that allow a credit check.

In enacting this legislation, Illinois joins a handful of other states (Washington, Hawaii, Oregon and Louisiana) with similar laws in place. While the ECPA is intended to prevent employers from denying a job or promotion based on credit history information that does not relate to a person's ability to perform a job, some would say that individuals who have not paid their bills or have a history of bad credit are more likely to engage in workplace theft and fraud. Although the ECPA recognizes this issue by creating certain exceptions, some of those exceptions are vaguely worded. Furthermore, there are other types of jobs to which none of the exceptions apply but where knowledge of a person's credit history would be valuable to an employer in making hiring or promotion decisions.

In light of this new legislation, companies in Illinois that conduct credit checks of prospective or current employees should review those practices and make any necessary changes, including eliminating, scaling back or revamping relevant procedures. If you have questions about the ECPA and how it could affect your business, please contact an attorney.