Federal Bill Aims to Ban Credit Reports for Employment Screening

Nick Fishman

We’ve written extensively about legislative efforts throughout the country to ban credit reports from the employment screening process.  Well, the Senator Dianne Feinstein has now introduced a senate bill (SA 3795) that would effectively ban the use of this important screening tool for most employers. We picked this up from Seyfarth Shaw’s One Minute Memo.

Employers may be aware that three states (WA, HI, and OR) currently have restrictions on an employer’s use of applicant or employee credit history in making employment decisions, and that there has been pending legislation at the federal level t0 do the same since July 2009.  On March 30, 2010, we (Seyfarth Shaw) issued a One Minute Memo on this topic, “Further Restrictions on Use of Credit Information in Employment Decisions: Oregon Joins Washington and Hawaii in Restricting Use; Legislation Pending at the Federal Level.”

In a new development, Senator Dianne Feinstein of California recently introduced SA 3795 as an amendment to Fair Credit Reporting Act.  She submitted this proposal as part of an amendment to bill S. 3217 “to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end ‘too big to fail,’ to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices.”

Similar to the pending HR 3149 which is currently in committee, Senator Feinstein’s bill proposes to restrict an employer from using a “consumer’s creditworthiness, credit standing, or credit capacity” in making any employment decision or for the basis of taking any adverse action—regardless of whether a consumer gives an employer consent to use such information.

The only exceptions to this prohibition would be for:

1) national security or FDIC clearance;

2) employment with state or local government agency which requires the use of this information;

3) employment in a management position with access to

customer funds at a financial institution; or

4) as otherwise required by law.

Given Senator Feinstein’s particular commitment to consumer protection legislation in the past, the introduction of SA 3795 gives added momentum to this hot button topic, and we encourage all employers to monitor this legislation.

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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