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Les Rosen's Corner SHRM Defends Use of Credit Reports

January 01, 2011 posted by Steve Brownstein

According to a news story on the Society for Human Resource Management (SHRM) website - "SHRM: Credit Checks Are Legitimate Screening Tool" - a representative for SHRM told the U.S. Equal Employment Opportunity Commission (EEOC) during a public hearing on October 20, 2010 that the federal government should not eliminate an employer's use of credit histories to help make decisions about job candidates.

The representative, in prepared comments, said that "SHRM believes there is a compelling public interest in enabling our nation's employers - whether that employer is in the government or the private sector - to assess the skills, abilities, and work habits of potential hires." In addition, the representative said credit history is one of many factors - including education, experience and certifications - that employers use "to narrow that applicant pool to those who are most qualified."

The SHRM representative pointed out Human Resources (HR) typically conducts a background check on the job finalist or group of finalists before making a job offer, and that background check might include checking personal references, criminal history, and credit history depending on the employer and the position to be filled.

Citing the Fair Credit Reporting Act (FCRA) of 1970 and the Civil Rights Act of 1964, the representative said SHRM believes "employees already have significant federal protection for the misuse of background checks."

Recent SHRM Research Department data on the use of employer background screening practices was also referenced at the meeting. Among the findings:

-Just 13 percent of employers surveyed conducted credit checks on all job candidates while another 47 percent consider credit history for candidates of select jobs.

-Employers generally conducted credit checks only for certain positions, including jobs of financial or fiduciary responsibilities (91 percent), senior executive positions (46 percent) and positions with access to confidential employee information (34 percent).

-Among employers that used credit checks, 57 percent initiated them only after making a contingent job offer and 30 percent initiated them after the job interview.

-Four out of 10 employers surveyed did not conduct credit checks.

The EEOC heard public comment from SHRM and others to determine the extent of the practice of using credit checks during the background screening of job candidates, the effectiveness of its intended purpose, and its potential impact on different populations.

More information about the EEOC public meeting can be found at: http://www.eeoc.gov/eeoc/meetings/10-20-10/index.cfm.

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