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How the FDIC Can Help People with Criminal Records

For the millions of Americans with a minor conviction in their past, getting a job in the banking industry can be easier.

People with a criminal record face a number of challenges getting a job, from suspicious employers to rules that prevent them from obtaining occupational licenses. There are over 45,000 state laws and regulations that impose negative consequences on those who have been convicted of a crime. These create barriers to reintegrating into society and often entrench poverty.

Thankfully, industry leaders and politicians have started to expand hiring opportunities for people with a criminal record. And now, the Federal Deposit Insurance Corporation is also seeking advice on how to help people with certain types of convictions find jobs in the banking industry. That’s a good first step — but in a comment letter the Brennan Center submitted Friday, we encourage the FDIC to more proactively expand job opportunities for people with a record.

The effect of a criminal record

Mass incarceration’s sheer scale makes so-called “second chance hiring” vitally important. Currently, 2.1 million people are behind bars in America and nearly 5 million people are on probation or parole. Overall, 77 million people have criminal records in the United States — more people than America’s population in 1900.

Having a criminal record can be a severe detriment to someone’s economic and social wellbeing. Depending on state law, people with a record may be barred from voting, excluded from public housing, or rendered ineligible for food stamps. By some accounts, experience in incarceration can lead to a nearly 20 percent decrease in earnings. These burdens help perpetuate racial disparities in and out of the criminal justice system.

Job restrictions in the banking industry

Federal law bars anyone convicted of a crime involving dishonesty or money laundering from working at most banks. The FDIC also considers the sale or manufacture of drugs to be a disqualifying crime of “dishonesty.”

Critically, though, this ban is not absolute. If someone requests an exception, the FDIC can in some cases waive the disqualification. And under certain circumstances involving relatively minor crimes involving dishonesty, the waiver is presumed to have been granted.

Over the last decade, the FDIC has slightly liberalized these rules. For example, people with certain convictions for minor crimes such as shoplifting or drug possession convictions no longer need to apply for permission before taking a banking job, and the criteria for determining what other crimes count don’t require FDIC permission were loosened.

These changes will help more people find jobs. But the FDIC’s rules still remain very restrictive and, in some places, confusing. Thankfully, late last year, the FDIC took another step — it proposed to codify the rules for hiring people with convictions into a formal regulation, with a public comment period before it’s finalized.

Expanding opportunities

In our comment letter, we recommend that the FDIC revise its rules even further to recognize the harsh realities of the criminal justice system.

First, the FDIC should consider broadening the exception for minor crimes of dishonesty to account for the overuse of imprisonment and pretrial incarceration in America’s criminal justice system. Under the current rule, anyone who spends more than three days in jail or prison doesn’t qualify.

Another part of the rule excludes people who are convicted of crimes of dishonesty with a possible maximum prison sentence of more than a year. But Brennan Center research demonstrates that many prison sentences are unnecessarily long. That means whether someone was eligible for a one- or three-year prison term may depend on how punitive a given state’s laws are rather than the actual severity of a person’s criminal record. This is another reason to expand the criteria for defining minor crimes, since the maximum possible sentence is not a reliable or consistent measure.

The FDIC also requires people to complete all parts of their sentence, including repayment of fines, before seeking permission to take a job in the banking industry. This is a mistake, as our research has documented the prevalence and unfairness of court costs and financial sanctions levied on people convicted of crimes. These fines are disproportionately imposed on communities of color, and they can easily snowball into massive debt. Barring people from taking a job in the banking industry — one that might help them repay that debt — makes it that much harder for people to escape poverty.

Lastly, we recommend that the FDIC clarify how it treats convictions for crimes of dishonesty that have been reversed on appeal or expunged. An expunged conviction is one that has been removed in whole or in part from someone’s record. Under the current rule, people would still need FDIC permission to apply for a job in the banking industry if the expungement was not “complete.” Given the wide variety of state laws on sealing and expungement, we think that rule would prove impossible to implement. For example, state laws on whether and when someone can deny the existence of an expunged conviction vary significantly. Some states arguably offer more complete relief than others, but how complete is “complete” enough?

Simple language tweaks there and in the rule’s handling of convictions reversed on appeal should make it much easier for people to understand whether and how to apply for FDIC permission when seeking a banking job.

It’s significant that the FDIC is seeking public comment on how to expand opportunities for people with a criminal record, but it’s only a first step. The changes we recommend will ensure that FDIC policy is efficient and easy for industry professionals to follow. Perhaps more importantly, they will make the rules fairer by accounting for the complex realities of crime and punishment in America.