FDIC finalizes rule to ease bank restrictions on hiring ex-cons

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WASHINGTON — The Federal Deposit Insurance Corp. finalized a rule allowing banks to hire employees with minor criminal backgrounds.

Since 1950, banks have been restricted by Section 19 of the Federal Deposit Insurance Act, which said that banks could not hire anyone “convicted of any criminal offense involving dishonesty, breach of trust, or money laundering" without prior written consent from the FDIC.

The agency proposed easing those limits late last year in response to complaints from banks and criminal justice advocates that the framework unfairly punished individuals for trivial — or “de minimis” — crimes. The final rule issued Friday, which replaces previous guidance from 1998, is largely the same as the November proposal but with some exceptions.

“The changes narrow the scope of crimes subject to Section 19, enabling more individuals to work for banks without going through the Section 19 application process, without increasing risk to the Deposit Insurance Fund,” FDIC Chairman Jelena McWilliams said in a press release.

One change from the proposed rule is banks can now hire employees convicted of crimes that were expunged or sealed without seeking the FDIC's consent. According to the FDIC, the change will result in a roughly 10% drop in applications for Section 19 exceptions.

The final rule will also expand the agency’s criteria for “de minimis” crimes by raising the minor crime threshold from one to two convictions before FDIC consent is required.

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FDIC Crime and misconduct Jelena McWilliams Regulatory relief Regulatory reform