FDIC Closing in on Implementing the Fair Hiring in Banking Act With Proposed Regulations for Section 19
The Federal Deposit Insurance Corporation (FDIC) is taking major strides towards reforming banking employment with proposed regulations for Section 19 of the Federal Deposit Insurance Act. These regulations aim to align with the Fair Hiring in Banking Act (FHBA), which recently eased restrictions on financial institutions hiring job candidates with criminal records. This move is part of a broader effort to reduce the impact of criminal history records on employment decisions.
Key Points of the Proposed Regulations
The FDIC’s proposed rules seek to bring their current Section 19 regulations in line with the amendments made by the FHBA. Some of the key points of the proposed regulations include:
1. Expanding the Types of Excluded Offenses: The proposed rules would expand the types of criminal offenses excluded from Section 19, including certain drug-related offenses. They would also broaden the scope of expunged, sealed, or dismissed offenses that are excluded.
2. Defining Older Offenses: The proposed regulations would provide key definitions for certain “older” offenses that the FHBA excludes from Section 19. This clarification will help determine whether an offense may be excluded based on how long ago it was committed or how long ago the individual was released from incarceration.
3. Unanswered Questions: While the proposed regulations bring significant changes, they also leave some unanswered questions. One of these questions pertains to the scope of offenses that will fall under the definition of “de minimis offenses” requiring an automatic waiver without an application.
Implications for Employers
Financial institutions should take note of the proposed changes intended to align the FDIC’s regulations with the FHBA. If these regulations are finalized, they will provide more opportunities for individuals with criminal records to seek employment in the banking sector. Employers will need to familiarize themselves with the new criteria for excluded offenses and adjust their hiring practices accordingly.
Section 19 and the FHBA
Section 19 of the Federal Deposit Insurance Act sets restrictions on financial institutions hiring individuals with certain criminal history records. It has historically required employers to conduct criminal background checks on job candidates, regardless of whether state or local laws prohibited the consideration of such criminal histories in employment decisions. Individuals with covered offenses were required to apply for a waiver from the FDIC.
The FHBA, signed into law by President Biden in December 2022, revised Section 19 and eased the restrictions on individuals with criminal records. The proposed FDIC regulations aim to align the current Section 19 regulations with the amendments made by the FHBA.
Certain Older Offenses Under the FHBA
The FHBA excludes certain offenses from Section 19 based on the age of the offense or the length of time since the individual was released from incarceration. The proposed regulations define when the clock starts for determining whether an older offense can be excluded from Section 19. This clarification brings more certainty and consistency to the evaluation process.
Expunged, Sealed, and Dismissed Criminal Records
The FHBA excludes certain offenses from Section 19 if an “order of expungement, sealing, or dismissal” has been issued in connection with the conviction. The proposed regulations expand the scope of excluded offenses to include convictions expunged, sealed, or dismissed by operation of law, not just by court order. This alignment with the FHBA’s changes provides a more comprehensive framework for considering expunged or sealed records.
Drug-Related Offenses
The FHBA expanded the list of offenses excluded from Section 19, including offenses related to drug possession. The proposed regulations remove the presumption that Section 19 covers drug-related offenses and outline specific criteria for excluding such offenses. This clarity helps financial institutions evaluate candidates with drug-related offenses more efficiently.
Designated Lesser Offenses
The FHBA designates certain offenses as “lesser offenses,” exempting them from Section 19 restrictions after a certain period of time. The proposed regulations align with this by excluding offenses such as using fake identification, shoplifting, trespassing, and driving with an expired license or tag, provided that a year or more has passed since the conviction.
De Minimis Offenses
The FHBA allows the FDIC to exclude other “de minimis offenses” that meet certain criteria, such as writing bad checks with an aggregate value of $2,000 or less. The proposed regulations provide additional criteria for bad checks to qualify as de minimis offenses. The FDIC is also reevaluating its current approach to de minimis offenses and seeking input on whether other offenses should be designated as de minimis.
Next Steps
The proposed FDIC regulations are a significant step towards aligning Section 19 with the FHBA’s amendments. The comment period for these proposed regulations has ended, and the FDIC will now review and consider the feedback received before issuing final regulations. Once finalized, these regulations will shape the hiring practices of financial institutions and provide more opportunities for individuals with criminal records to gain employment in the banking industry.
Frequently Asked Questions:
Q: What is Section 19 of the Federal Deposit Insurance Act?
A: Section 19 sets restrictions on financial institutions hiring individuals with certain criminal history records.
Q: What is the Fair Hiring in Banking Act?
A: The Fair Hiring in Banking Act (FHBA) eased the restrictions on financial institutions hiring individuals with criminal records. It revised Section 19 and provided more opportunities for individuals with criminal records to seek employment in the banking industry.
Q: What are the key points of the proposed regulations?
A: The proposed regulations expand the types of excluded offenses, define older offenses, and provide criteria for expunged, sealed, and dismissed criminal records. They also align with the FHBA’s changes to drug-related offenses, designated lesser offenses, and de minimis offenses.
Q: How will the proposed regulations impact employers?
A: The proposed regulations will provide more opportunities for individuals with criminal records to seek employment in the banking sector. Employers will need to adjust their hiring practices to align with the new criteria for excluded offenses.
Q: What are the next steps for the proposed regulations?
A: The FDIC will review and consider the feedback received during the comment period before issuing final regulations. Once finalized, these regulations will shape the hiring practices of financial institutions.
