Time To Re-evaluate Your Use of Credit Reports?

Nick Fishman

Our good friends Pam Devata and Caitlin Senff from Seyfarth Shaw have written a great article on the need for employers to consider how they use credit reports to make informed hiring decisions.  While it is perfectly legal to run credit reports in the background screening process, employers should take note that both state and local governments are taking steps to limit their use.

Check out their article, “Use Credit History Wisely“,  published by HR Executive.  For purposes of brevity, I’ve included their summation on what employers can do to make sure they maintain compliance.

  • Evaluate Pre-employment Inquiries and Hiring Procedures- HR leaders should review key documents and processes to make sure they comply with the various state laws and the EEOC’s E-RACE initiative. Include in the review all documents beginning with employment applications and throughout the pre-employment/background-screening process.  For example, employers should evaluate when credit information is being sought and how it is being applied. Of course, employers obtaining and evaluating such information must also continue to ensure that the requisite disclosures are provided to the employee/applicant under the FCRA and applicable state laws.
  • Consider Using Credit History More Narrowly- To comply with the new limits set by state laws and prepare to defend employment practices in the event of EEOC investigation, employers should reconsider the manner in which they are using credit. For instance, reliance on credit history may be a substantial concern for a high-level financial executive, while its application to a clerical position who does not handle cash may be more attenuated.
  • Review Background Check Criteria with Counsel- The most critical proactive measure employers should take is to have their background-screening policies, employment applications and hiring criteria reviewed by counsel. Without doing so, employers are vulnerable to the possibility that the EEOC will become the first set of eyes to review them — and then it will simply be too late.

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Nick Fishman
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Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
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