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    It’s official.  Both the media and the government are turning the screws on employers using credit reports as part of their job candidate background screening process.  Every day, we are seeing more and more state laws introduced to curb the use of credit reports and in the case of a federal bill sponsored by U.S. Rep Steve Cohen (D. Tennessee), HR 3149 an attempt to ban them altogether from the hiring process.

    Certainly, there are employers out there who have abused the privilege of reviewing this information.  However, the vast majority of employers who utilize credit reports are doing so legitimately and only when necessary.  SHRM reports that nearly 47% of all employers use them for certain job positions.  I am not the great defender of credit reports, but an all-out ban of them would be disastrous for some employers and their customers.  There are many unintended consequences of making this practice illegal.  It is these consequences that have caused California governor Arnold Schwarzenegger to veto a bill introduced to do so not once, but twice.  The governor argued, “This bill would significantly increase businesses’ exposure to civil actions over the use of credit checks. Further, the bill would increase administrative costs to those employers who must legitimately use credit reports as a screening tool by requiring that the employer first abide by its onerous requirements. California employers and businesses have inherent needs to obtain information about applicants for employment. The bill would become a new employer obstacle to the use of available information needed to make hiring decisions.”

    The Wall Street Journal published a balanced article in this morning’s paper about this issue which identifies the concerns of job applicants while highlighting the needs of employers to arm themselves with such information. Take a look.

    In the meantime, SHRM also published an article this morning that discussed the EEOC plans to address this issue in the next 12-18 months.  They also offered some solid advice from attorney Leslie E. Silverman, partner at Proskauer Rose LLP, in Washington, D.C. for what employers can do to ensure that their practices don’t invite litigation:

    “It would be really risky for your company to use a ‘one-size-fits-all’ policy,” Silverman said in a March 3, 2010, Society for Human Resource Management webcast. “A blanket application of credit checks [provides] your company with less of an ability to argue that it is job related,” she said. Silverman advised that HR:

    • Be selective on which positions to subject to a credit check.
    • Be able to articulate a rational reason on why a credit check is needed for predicting job performance and related to the business functions.
    • Ensure that your managers use only the information relevant to the job in question that is needed to make an employment decision. “Avoid making decisions based on extraneous issues if you can avoid it,” Silverman said.
    • Allow your candidates to explain the reasons for negative credit information. “This will place you in a better position to assert that the credit information really was job related and consistent with business necessity,” she said.

    For the record, most employment attorneys and employment background screeners have been saying this for a long time.

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      4 Responses to “More on Bad Credit and Employment Background Screening”

      1. Ron Congress says:

        Trans Union Testimony in Oregon . . . there is NO RELATION WHATSOEVER
        between personal credit and fraud, even they say so. This is about
        them making money, period!

        These are the people doing the credit checks . . .

        Who is the thief?

        Speaking of fraud and corruption . . .

        In survey after survey, including a recent MSNBC survey, more than 90
        percent of Americans say that workplace discrimination based upon
        someone’s personal credit report is wrong and should be illegal. Yet
        Congress is being bribed by corporate campaign contributors and strong
        armed by lobbyists to kill the legislation that would make the
        practice illegal. That is NOT “democracy by the people and for the
        people.” How can Congress be allowed to thwart the overwhelming will
        of the people?

        Most Americans don’t even know HR3149: The Equal Employment for All
        Act even exists. What’s more, they don’t know about the corruption and
        backroom deal making taking place to keep the legislation stalled in
        the House of Representatives Financial Services Committee.

        Follow the money and expose the truth:

        Financial Services Committee Members Taking Money to Stall HR3149


        Trans Union:


        Please support our democracy, the overwhelming will of the people and
        the rights of highly qualified American workers to compete on a level
        playing field during this horrible economic disaster. Join our team on
        Facebook at or shoot us an e-mail with
        “sign me up” typed in the subject line.

      2. [...] after the state approved a $9.1 million abatement to a convicted embezzler.  Lest we forget the drum beat of lawmakers throughout the country attempting to ban the use of employment credit reports.  Here’s an [...]

      3. [...] Pay special attention to the studies on Credit Reports.  As we all know the EEOC is attempting to crack down on their use. [...]

      4. […] Tennessee Congressman Steve Cohen has been trying to push this bill through congress for years with no success.  Perhaps his fellow legislators recognize that an […]

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