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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.

FDIC official logo
Chip Somodevilla

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.