Defense Finance Agency Fires Employee Over Poor Credit

Nick Fishman

On Sunday, the Cleveland Plain Dealer reported that The Defense Finance and Accounting Service planned to terminate 67 workers after employment credit reports revealed what the agency found to be derogatory information.  Many of the positions DFAS has are highly sensitive (responsibilities include issuing President Barack Obama’s pay check),  as employees have access to both personal data and bank accounts.  These are positions where reviewing a credit report as both a condition of employment and continued employment is warranted.  According to the article, the problem started “when jobs deemed to be noncritical and nonsensitive were moved by DFAS into the noncritical, sensitive classification. That allowed DFAS to conduct credit checks on employees for security reasons.”

Naturally, when I read that statement, I bristled and fully expected a firestorm to ensue.  Why? Pick up any paper these days and you’ll read about both state and federal laws designed to ban the use of credit reports.  Most are aimed at employers that review credit checks as part of the employment screening process on candidates whose jobs have no responsibility for financial records, sensitive information or money.

So, you can imagine my relief when I read yesterday’s news that DFAS has agreed to suspend their credit-related firings.    While I can’t find much common ground with Ohio Congressman Dennis Kucinich, I wholeheartedly agree with his sentiments on this issue:

“Kucinich said the agency needs to review whether its payroll workers need the ‘very aggressive level of security clearance that would be applied to only high-level employees’ that resulted in the credit-related firings.”

That’s good advice for all employers.  In fact, our good friend Pam Devata offered similar suggestions in her recent article entitled, “Using Credit Wisely“.  See her suggestions below.

* 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.

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.
Nick Fishman
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