The FDIC has published a final rule designed to revise and codify the Statement of Policy that appears in Section 19 of the Federal Deposit Insurance Act. This move helps ex-offenders find work and creates significantly more hiring options for banks.
Simply put, these new guidelines remove certain hiring restrictions for minor offenders seeking employment in the banking industry.
The move also relieves banks of regulatory burdens. Financial institutions wishing to hire an ex-offender no longer have to secure written consent under specific circumstances.
So, what exactly do these new regulations mean for hiring in the banking industry? And what prompted this change?
The Reason Behind the Rule
So much of banking is about minimizing risk. Section 19 of the FDI Act is no different.
Since 1950, this rule has banned any person “convicted of any criminal offense involving dishonesty, breach of trust, or money laundering” from participating “in the conduct of the affairs of any insured depository institution.”
In the past, some exclusions could be made, but only with the written consent of the FDIC.
So what changed? Why did the FDIC choose to loosen restrictions now?
The Push for Looser Restrictions to Help Ex-Offenders Find Work
The language of Section 19 has been all-encompassing. The ban includes even minor, youthful indiscretions many employers wouldn’t think twice about.
These tight restrictions have long been a point of contention for civil rights organizations, civic organizations, and even banks themselves.
Even JPMorgan Chase has called for Section 19 reform, citing the societal and economic benefits of hiring ex-offenders. Just last fall, CEO Jamie Dimon announced a program designed to give former convicts more opportunities within their organization.
For many, the bottom line was that Section 19 was simply too strict as it was written. A revision could create an easier and more open hiring process for employers and help ex-offenders find work.
The New Section 19
So, how have the rules changed in the revised Section 19 of the FDI Act?
Under the new rule:
- Rather than excluding only certain types of expungements, the scope of Section 19 excludes all offenses that have since been sealed or expunged.
- Individuals with two minor de minimis crimes qualify for the de minimis exception. (Previously, only those with one de minimis crime could qualify.)
- There is no longer a five-year waiting period following an individual’s first de minimis conviction. For a second de minimis conviction, there must be a three-year waiting period, unless the individual was 21 years old or younger at the time of misconduct. In that case, it is an 18-month waiting period.
- The de minimis threshold for small-dollar thefts has doubled to $1,000.
- The de minimis exception regarding the use of fake identification now includes crimes related to purchases, premises entry, or activities in addition to alcohol-related crimes.
What Do These Changes Mean for Employers?
In the simplest terms, the new publication of Section 19 means banks have more freedom in their hiring. They also have fewer hoops to jump through when they find a great candidate with a complicated history.
This is also a good reminder that pre-employment background checks are both necessary and complicated.
It’s important to know your candidate’s history, but it’s also important to make sure the applicant has access to their criminal report. Not only is this part of your adverse action obligation, but it also gives an excellent prospect the opportunity to explain.
If you could use a hand streamlining your background screening process, PeopleG2 can help. We provide tech-forward tools to make sure your candidates are in the loop. We also offer comprehensive compliance support to make sure your process is still legal.
Drop us a line and let us know how we can help.