Vermont Laws on Employer Use of Credit Reports

Vermont law prohibits most employers from using credit reports as a basis for employment decisions.

Vermont is the most recent state to limit employers in their use of credit reports to make employment decisions. Most employers may not use credit information to decide whom to hire, promote, or fire for most positions. The law includes exceptions for certain employers and certain positions. Even for these employees, however, Vermont prohibits employers from making decisions based solely on credit history.

Ban on Using Credit Reports in Employment

Unless an exception applies, Vermont employers may not inquire about an applicant’s or employee’s credit report or credit history. Employers are also prohibited from discharging, refusing to hire, or otherwise discriminating against an applicant or employee in the terms, conditions, and privileges of employment (including compensation) based on that person’s credit report or credit history. For purposes of Vermont law, credit history means any information obtained from a third party, whether in a credit report or otherwise, that relates to the person’s current or past borrowing and repayment behavior, financial condition, and ability to meet financial obligations.

Exceptions for Certain Employers and Employees

Despite the prohibition described above, some Vermont employers may use credit reports or credit history, at least for some positions. Employers are exempt from the general ban on using credit reports and credit history if:

  • the information is required by state or federal law
  • the employer is a financial institution or credit union
  • the employer is hiring a law enforcement officer, emergency medical personnel, or fire fighter
  • the employer is hiring for a position that will have access to confidential financial information (sensitive financial information of commercial value that a customer or client has authorized the employer to obtain, process, and store and that the employer entrusts only to managers or employees)
  • the employer is hiring for a position that will have a fiduciary financial obligation to the employer or a client of the employer, including the right to enter into contracts, collect debts, issue payments, or transfer money
  • the employee is hiring for a position that will have access to the employer’s payroll information, or
  • the employer can show that the information is a valid and reliable predictor of performance in the position for which it is hiring.

Even if one of these exceptions applies, the employer may not use credit history or a credit report as the sole factor in making an employment decision.

Notice Procedures

Employers in every state must follow the procedures set out in the federal Fair Credit Reporting Act (FCRA), including getting written authorization before pulling an employee’s or applicant’s credit report and providing written notice before using information in a credit report as the basis for a negative employment decision. (For more information on what the FCRA requires, see our article Can Prospective Employers Check Your Credit Report?)

Vermont employers must follow a stricter set of rules. For starters, they aren’t allowed to get credit reports or credit history in most situations. Those employers who fall within one of the exceptions listed above must do all of the following:

  • Get the employee’s or applicant’s consent, in writing, each time the employer seeks to obtain that person’s credit report or credit history.
  • Disclose to the employee or applicant, in writing, the reasons for accessing the information.
  • If the employer takes adverse action based in part on the credit history or report, the employer must disclose, in writing, the basis for the decision. The employee must have an opportunity to contest the accuracy of the credit history or report.
  • Ensure that the employee or applicant doesn’t have to pay any of the costs of getting the credit history or report.
  • Maintain the confidentiality of the credit history or report, and either destroy it or give it to the employee or applicant if that person is discharged or not hired.