WASHINGTON – The Federal Deposit Insurance Corporation (FDIC) has delivered a massive shakeup to the financial industry with the approval of revised Section 19 regulations, a move aimed at promoting fair hiring practices within banking.
This historic decision by the FDIC Board of Directors aligns the agency’s rules with the Fair Hiring in Banking Act (FHBA), which came into effect on December 23, 2022. The FHBA seeks to expand employment opportunities, particularly for people of color disproportionately affected by the criminal justice system.
“I strongly support these changes,” said FDIC Chairman Martin J. Gruenberg. “They will open doors in the banking industry for many who have been unfairly locked out due to past transgressions.”
The revisions to Section 19 regulations, which previously prohibited certain individuals with criminal records from participating in banking without prior consent from the FDIC, now encompass several significant changes:
• Older Offenses Excluded: The FHBA excludes specific offenses based on the passage of time since the offense or release from incarceration. The final rule reflects these exclusions.
• Expunged, Sealed, and Dismissed Records: Certain convictions that have been expunged, sealed, or dismissed are no longer considered under Section 19, in line with FDIC’s existing regulations.
• De Minimis Offenses: The final rule aligns with the FHBA’s exclusion of “de minimis” offenses, including minor offenses specified by either the FHBA or the FDIC through regulations.
• Criminal Offenses Involving Dishonesty: The FDIC has revised its stance on certain drug-related offenses previously considered crimes involving dishonesty. Under the new rule, such crimes may not automatically require an application for participation in banking.
The final rule also provides interpretive language on offense definitions and applicability of Section 19 in foreign jurisdictions.
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