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Changes seek to promote fair hiring in the banking community by narrowing automatic exclusions
Recent amendments to Section 19 of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. Section 1829, made as part of the James M. Inhofe National Defense Authorization Act for Fiscal Year 2023, have significantly impacted employment in the financial services industry. These changes are crucial for employers as they address barriers to hiring individuals with certain criminal histories, particularly for roles within banks and other financial institutions regulated by the Federal Deposit Insurance Corporation (FDIC). The amendments aim to balance financial institutions’ need for safeguarding integrity with providing fair opportunities to individuals with prior offenses, reflecting a shift toward more inclusive hiring practices.
Key Amendments
The most notable changes under the amended Section 19 include the automatic exclusion of older offenses, the narrowing of the definition of “criminal offenses involving dishonesty,” and the exclusion of lesser de minimis, and certain misdemeanor offenses. These amendments represent a broader effort to remove certain obstacles to employment in the banking industry, especially for individuals who might otherwise be rehabilitated and qualified for jobs but were previously barred due to their criminal records.
A major change is the automatic exclusion of certain older offenses from being considered under Section 19. Prior to the amendment, individuals with criminal records were required to seek FDIC consent to work in financial institutions, even for offenses that were decades old. This could be an onerous process, leading to unnecessary barriers for individuals who have long since rehabilitated. Under the new amendments, offenses that occurred more than seven years before the date of employment or application for FDIC consent are now excluded from consideration.
For employers, this means that criminal background checks may now reveal fewer offenses that trigger automatic disqualification, simplifying the hiring process and widening the pool of eligible applicants. By focusing on more recent offenses, the amendment recognizes that many individuals have the capacity for rehabilitation and should not be forever barred from employment in the financial industry.
Another important revision concerns the exclusion of lesser, de minimis offenses from the definition of crimes that disqualify individuals under Section 19. Previously, even minor offenses such as low-level theft could potentially disqualify someone from working in a bank without FDIC consent. The amendments now exclude certain minor offenses from consideration, particularly those involving small amounts of money or property.
For example, theft involving less than $1,000 and non-repetitive offenses will not be considered grounds for disqualification if they occurred over a year ago. This change is significant because it allows individuals with minor infractions, often committed in their youth or under mitigating circumstances, to pursue careers in the financial services industry without the stigma of a disqualifying record.
Employers should take note of these changes because they will reduce the need for extensive background screening processes or seeking FDIC waivers for minor criminal infractions, potentially reducing administrative costs and making hiring less burdensome.
The amendments also exclude misdemeanors that occurred more than a year before the date of application from being considered under Section 19. This change particularly benefits individuals whose past misdemeanor offenses, while not de minimis, are not recent enough to pose a significant concern regarding their trustworthiness or fitness to work in the financial industry.
For employers, this means that background checks will need to distinguish between recent and older offenses when evaluating applicants, and a one-year window is now considered a relevant cut-off for certain misdemeanors. It reflects a policy shift that acknowledges the potential for individuals to reform and the irrelevance of older offenses to present-day employment considerations.
Perhaps one of the most progressive changes is the exclusion of certain controlled substance offenses from being categorized as “criminal offenses involving dishonesty” under Section 19. In the past, drug-related offenses were often lumped into broader categories that could trigger disqualification. Now, offenses related solely to possession of controlled substances are specifically excluded from consideration under the FDIA’s prohibitions.
This shift aligns with broader trends in criminal justice reform, particularly regarding the decriminalization of controlled substances and the recognition that drug possession does not necessarily equate to dishonesty or a lack of integrity. For employers, this amendment signals that individuals with past drug possession charges may now be more easily considered for financial services roles, which can help widen the candidate pool in a competitive job market.
Conclusion
The amendments to Section 19 represent a meaningful shift toward fairer hiring practices within the financial services industry. By excluding older, lesser, and certain non-violent offenses from the definition of disqualifying crimes, these changes reflect a growing recognition that individuals should not be permanently barred from employment opportunities due to their past. For employers, these amendments simplify the hiring process and expand the potential labor pool by reducing the administrative burden of seeking FDIC consent for applicants with certain criminal records.
These changes also highlight the importance of updating hiring practices to align with the new legal standards, ensuring that employers remain compliant while also embracing a more rehabilitative approach to employment in the financial sector.
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The foregoing content is not given as legal advice but is instead offered for informational purposes only. Fair Screen is not a law firm and therefore cannot offer legal advice. We always recommend speaking with an attorney who is knowledgeable about your company’s individual circumstances prior to making any hiring decisions or policy changes. Fair Screen makes no assurances regarding the accuracy or completeness of this content.