Credit Reports

Six Myths About Using Credit Reports For Employment Screening

April 25, 2011 By Chris Miller

Finally we’re getting some factual reporting on the use of credit checks for employee screening. Erica Sandberg, a Personal Finance Expert / Reporter, wrote an excellent article “6 myths about employer credit checks“.

Here’s a recap:

Myth No. 1: Most employers pull all applicant’s reports.

Truth: Few do, and usually for specific reasons.

Myth No. 2: Employers and lenders look for the same information.

Truth: Employers take a longer view on your credit past.

Myth No. 3: Poor credit will immediately disqualify you.

Truth: Your checkered credit history may be ignored.

Myth No. 4: Employers use credit checks to discriminate.

Truth: Employers pull reports to protect themselves.

Myth No. 5: All negative information is bad.

Truth: Some credit report information is more alarming than others.

Myth No. 6: Employers don’t care about your reasons for having bad credit.

Truth: They care a lot.

Read the entire article here.

Photo Credit: TheTruthAbout…

How To Use Credit Reports For Employment Background Checks

April 23, 2011 By Chris Miller

Maryland joins Hawaii, Washington, Oregon and Illinois as states that recently passed laws regulating the use of credit history-related information by employers for employment purposes. The Maryland law restricts the use of credit reports and credit history information unless specified conditions are met.

Employment Practices Solutions, Inc. (EPS), a human resources consulting organization, offers the following tips for employers in an article titled:

To Check or Not to Check: The Pros and Cons of Using Credit Reports in the Hiring Process

If an employer currently uses, or is contemplating the use of, credit histories to evaluate applicants, they should consider the following:

Is there a clear policy or practice regarding what positions will include a consideration of credit histories?
Are they used consistently for all applicants to those positions?
Is there a sound business reason to use the credit information for each of the positions that they are reviewing it for? That is, is it job-related? (i.e., will the position require the handling of money or assets, making fiduciary decisions, access to trade secrets or confidential information?)
Are there any applicable laws in the states in which they have employees? If so, is the employer considered a “covered employer” and are their current policies and practices consistent with such laws?
Are they getting the credit information from a reliable source?
Does the credit information have a record of reliability?
Have their HR professionals and/or hiring managers been trained in how to use and/or interpret credit reports?
Are applicants being given the opportunity to review and respond to the information contained in the credit reports or are all applicants with a weak credit record screened out?
Is the credit history used as a deciding factor between applicants with equal qualifications?
At what point in the selection process is it being used?

How Credit Checks Affect The Decision To Hire – A poll by SHRM provides an up-to-date look at the impact of credit checks on the decision to hire. It looks at factors that have the most impact on hiring decisions, the reasons that organizations conduct credit checks, the types of job candidates most likely to be subject to credit checks and more.
Don’t Ban Pre-Employment Credit Checks – Evil HR Lady (Suzanne Lucas) offers some common-sense advice for employers on how to properly use credit reports.

Photo credit: shawnzrossi

How Credit Checks Affect The Decision To Hire

September 24, 2010 By Chris Miller

This recent poll by SHRM provides an up-to-date look at the impact of credit checks on the decision to hire. It looks at factors that have the most impact on hiring decisions, the reasons that organizations conduct credit checks, the types of job candidates most likely to be subject to credit checks and more.

SHRM POLL CREDIT CHECKS

View more presentations from shrm.

Possible Amendment to Fair Credit Reporting Act – Ban Employers’ Use of Credit Checks

May 10, 2010 By Chris Miller

Seyfarth Shaw LLP, one of America’s leading full-service law firms, reported Senator Dianne Feinstein of California recently introduced SA 3795 as an amendment to the Fair Credit Reporting Act.

“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.”

Photo Credit: TheTruthAbout…

Another State Restricts Use of Credit Reports in Employee Background Screening

March 31, 2010 By Chris Miller

On March 29, 2010, Oregon Governor Kulongoski signed legislation (S.B. 1045) that specifically prohibits employers from using credit history in making hiring, discharge, promotion, and compensation decisions unless the applicant or employee is given advanced written notice and the credit history is substantially job-related. Although the proposed legislation was to be effective July 1, 2010, the Governor declared the legislation effective immediately.

Oregon joins Washington and Hawaii as one of three states that have effectively banned workplace credit checks. There is also pending legislation in Illinois that recently passed the House of Representatives, which would impose similar restrictions. This trend underscores the importance of employers being aware of state law restrictions pertaining to credit and background checks, particularly in multistate businesses.

There are four exceptions to the Oregon law:

Bank and credit union employers
Employers that are required by state and federal law to use credit histories for employment purposes
Public safety officer employers
Employers that can demonstrate that credit information is “substantially job-related” and that provide written disclosure of the reasons for the use of the credit check

The statute does not further define what “substantially job-related” means, nor has the Oregon Bureau of Labor and Industries (BOLI) adopted rules to inform employers on how it will be applied.

In the absence of clear rules or guidance from BOLI, employers that intend to continue utilizing credit histories after March 29th, 2010, should proceed with caution and consult legal counsel to determine whether they fit into one of the statute’s exceptions. If they do not fit within an exception, employers should develop alternatives to current practices to avoid penalties and civil liability. A violation of the new law is an unlawful employment practice, and an aggrieved individual can file a complaint with BOLI and a civil lawsuit for injunctive relief, reinstatement or back pay, and attorney’s fees.

Compliance steps for Oregon Employers:

Do not run credit reports for employees or applicants, unless your company fits into one of the four exceptions.
Seek counsel to determine if credit information is “substantially job-related.”
You can still run other types of background checks (criminal record searches, employment and education verifications, etc.) as you did before this law.

Sources: Seyfarth Shaw, Davis Wright Tremaine LLP

Photo credit: Neubie