FDIC Proposal Would Allow Job Applicants with Minor Convictions to Work for Banks

The FDIC proposed amendments to the Federal Deposit Insurance Act Section 19 ("Penalty for unauthorized participation by convicted individual") to allow certain individuals who have prior convictions to work for FDIC-insured financial institutions.

Under the proposed rule, individuals who have been convicted of offenses involving dishonesty, breach of trust or money laundering, or who have entered into a pretrial diversion or similar program in connection with a prosecution for such offenses, are prohibited from participating in the affairs of an FDIC-insured institution without the FDIC's prior written consent. Under the proposal, and in order to align the FDIC's regulations with the Fair Hiring in Banking Act and the James M. Inhofe National Defense Authorization Act for fiscal year 2023, the proposed rule would permit participation by individuals under the following circumstances:

• a conviction for the following: fake identification, shoplifting, trespassing, fare evasion and driving with an expired license, if one year or more has passed since conviction;
• the possession of a controlled substance; and
• convictions that have been expunged, sealed and dismissed.

Comments on the proposal must be received within 60 days after publication in the Federal Register.

Statements

FDIC Vice Chair Travis Hill commended the proposal for (i) reducing the burden on job applicants that have committed minor crimes and (ii) "potentially expand[ing] the pool of job applicants for banks in a tight labor market."

CFPB Director Rohit Chopra noted the "irony in the longstanding policy to ban individuals who were convicted of low-level crimes," while the only accountability bank regulators seek of top bank executives who "repeatedly preside[]" over consumer abuses and money laundering is for their respective banks to pay a fine.