Applicable law and regulations previously prohibited FDIC-insured financial institutions from hiring any individuals with criminal records unless the FDIC first consented. This has generally prohibited individuals convicted of certain crimes from becoming employed by or participating in the affairs of an FDIC-insured depository institution. On Dec. 23, 2022, President Biden signed into law legislation that relaxes the existing restrictions. The new legislation became effective immediately.
The goal of the legislation has been stated as ensuring that a reliable workforce exists for the banking industry while offering hardworking and rehabilitated individuals a chance at careers in banking.
The law, as amended, excludes certain older offenses from causing a hiring prohibition, for example: (1) offenses that occurred seven or more years ago, (2) offenses that resulted in incarceration and the incarceration ended more than five years ago, (3) offenses committed under the age of 21 more than 30 months after sentencing for that offense, and (4) offenses that have been expunged from official records.
Other “de minimus” offenses considered to be relatively minor also do not require FDIC consent which is deemed to be automatically granted. The FDIC is authorized to put rules in place that designate the de minimus offenses. Some specific offenses considered to be relatively minor include use of fake identification, shoplifting, trespassing, fare evasion and driving with an expired license or tag, if one year or more has passed since the conviction on such offenses. The legislation also excludes misdemeanor criminal offenses committed more than one year before the individual applies for FDIC consent and certain offenses involving the possession of controlled substances.
The FDIC’s publication of further regulations to define the new changes should be closely monitored. Prior to these changes, insured financial institutions could reject certain job candidates without fearing challenges if their employment was prohibited by law. While there may be advantages in having a broader labor pool, there may also be more risk in turning down certain candidates now that the law and regulations no longer provide a clear hiring prohibition as to minor or older offenses. Insured financial institutions should review their current policies, procedures and employment applications and ensure that hiring professionals in their organizations are aware of these changes and know how to apply them.
* This article first appeared in The Journal Record on April 26, 2023, and is reproduced with permission from the publisher.