• Text Size
• Print
• Email

  From:
  

  To:
  

  Hey! Check out this news page: https://www.thebackgroundinvestigator.com/Articles/Should-Employers-Check-Job-Applicants’-Credit-History/202/index.php.

  SendCancel

Top Stories

Should Employers Check Job Applicants’ Credit History?

December 01, 2010 posted by Steve Brownstein

By Ruth Mantell

With the national unemployment rate at 9.6%, the U.S. Equal Employment Opportunity Commission is concerned about employers using job applicants’ credit history as a screening tool.

The commission met to hear testimony from various groups about employers’ practice of checking credit reports.

The meeting is part of a longer-term examination of barriers to employment.

“An ever increasing number of job applicants and workers are being exposed to employment screening tools, such as credit checks, that could unfairly exclude them from job opportunities,” said Jacqueline Berrien, chairwoman of the Equal Employment Opportunity Commission.

It’s legal for employers to obtain personal information about job seekers and workers, including consumer reports that measure credit worthiness. But some say using credit history as a screening tool has a disparate impact on some groups.

“Numerous studies have documented how, as a group, African Americans and Latinos have lower credit scores than whites,” said Chi Chi Wu of the National Consumer Law Center. “If credit scores are supposed to be an accurate translation of a consumer’s credit report and creditworthiness, that means these groups will fare worse when credit history is considered in employment.”

Democratic Rep. Luis Gutierrez of Illinois, chairman of the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, said in a statement last month that there is the potential for a “subconscious bias” against those with more negative data in their reports.

“You simply cannot tell a person’s character, integrity or how well they will perform their job by looking at their credit report,” Gutierrez said. “The fact that someone has a credit report that is not superior to another job candidate does not make them less able to do the work at an office or a factory nor does it make them more or less likely to steal from their employer.”

The subcommittee recently held a hearing on a bill that would amend the Fair Credit Reporting Act to prohibit employers, with certain exclusions, from using a consumer report for hiring or firing if the report contains information about creditworthiness, credit standing, or credit capacity.

Worker advocates also voiced concern that consumer reports may not accurately reflect or predict whether a job seeker will succeed in the workplace. And some questioned whether credit checks should be used for workers outside of certain levels or functions.

Employers are required to let applicants know whether their credit report was used against them. The idea is to give applicants the opportunity to dispute any inaccuracies. But Wu said many employers are not making the necessary disclosures.

While using credit checks is a controversial practice, for some employers checks are essential. Take, for example, the federal government. The U.S. Office of Personnel Management investigates federal applicants, employees, and contractors, whether or not the position requires a security clearance.

According to OPM, “a search of the records of commercial credit reporting agencies is an integral part of almost all background investigations.”

According to a report from the Society for Human Resource Management, 13% of organizations conduct credit checks on all job candidates, 47% on some candidates, and 40% do not conduct credit checks at all.

SHRM said that “only specific credit information,” such as pending debt lawsuits and accounts in debt collection, are likely to affect employers’ decisions to extend a job offer. Finally, according to SHRM, employers “overwhelmingly” use credit checks at the end of the hiring process, not to screen out applicants up front.

“SHRM research shows that the top reasons why organizations conduct credit background checks are to limit theft and embezzlement in the workplace, reduce liability for negligent hiring, assess the overall trustworthiness of the job candidate, and comply with applicable state laws requiring a background check for particular positions,” according to SHRM testimony Wednesday.

Michael Eastman, executive director for labor law policy with the U.S. Chamber of Commerce, said employers use credit-history checks for employees with direct access to funds and sensitive information, such as workers in human-resource functions.

He added that it’s a “common misperception” that employers specifically consider credit scores when examining credit history.

“Simply put, I have found no employer that considers credit scores. It is my understanding that employers typically do not even receive credit scores as part of the credit report,” Eastman said.

“It is important to emphasize that the factors that would go into an employment decision based on a credit report can differ rather significantly from the factors that would go into a decision to lend credit,” he said. “A credit score of 550 or 700 may convey important information to potential lenders, but the number, standing by itself, is meaningless to employers.”