Covered financial institutions (such as banks and credit unions) have been swept into a new “fair chance” initiative designed to further reduce barriers to individuals with certain convictions.

The James M. Inhofe National Defense Authorization Act for Fiscal Year 2023 (NDAA), signed by President Joe Biden on December 23, 2022, contains Section 5705, the “Fair Hiring in Banking” provisions, which statutorily protects applicants and employees with certain criminal convictions, establishes new rules for expungements and de minimis offenses, and creates a more applicant-friendly consent application process.

Background

Originally signed into law in 1950, Section 19 of the Federal Deposit Insurance Act (FDIA) prohibits anyone from working for a Federal Deposit Insurance Corporation (FDIC)-covered institution who has been convicted of a criminal offense involving dishonesty, a breach of trust, or money laundering, or who has entered into a pretrial diversion program for such an offense. Individuals are barred from:

1. Becoming, or continuing as, a director, officer, employee, or controlling stockholder, or agent, of an insurance depository institution;

1. Owning or controlling any insured depository institution; or

1. Participating, directly or indirectly, with the affairs of any insured depository institution, without the prior written consent of the FDIC.

Similarly, Section 205(d)(1) of the Fair Credit Union Act (FCUA) contains prohibitions on employing a person who has been...

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