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Credit History: Is it Any of Your Employer's Business?

Credit History Relevant, Employers Say

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But an applicant's credit history is relevant, at least for many jobs, those who oppose efforts to restrict use of this information say. "There are certain types of jobs where our members feel very strongly that a person's credit background is important to look into prior to hiring," says Estenson. "There are a lot of jobs where a person's financial background is very important, in a case where a person might be handling private financial information, or where financial malfeasance is a possibility."

While the proposed Equal Employment for All Act would prohibit the use of consumer credit checks against prospective and current employees for most jobs, it would make exceptions for jobs that require national security or FDIC (Federal Deposit Insurance Corporation) clearance; for jobs with state or local government agencies that require the use of a credit report; supervisory, managerial, professional or executive positions at a financial institution; where otherwise required by law.

The exceptions allowed by the Act appear to concede that credit history is relevant in cases where an individual would manage sensitive financial or security information, according to Colleen Parker Denston, who spoke at hearings on the bill on behalf of the Society for Human Resource Management, which opposed the legislation. In addition, there are positions in "myriad industries" where ensuring employee integrity is in the public interest, she argues.

One reason employers should be able to consider an applicant's credit score, along with other information that might turn up in a background check, is that these days former employers are often reluctant to provide an accurate assessment of an employee's work history, strengths, and weaknesses, Denston testified. To avoid potential defamation lawsuits, many employers will provide only the minimum in a reference check — perhaps the former employee's job title and dates of employment — so employers must turn to third-party screeners and other means to accurately assess a job candidate.

As financial pressures on households increase, so does employee theft, Denston argues. A National Retail Security Survey estimates that the U.S. retail industry lost about $14.4 billion in 2009 due to various forms of employee thievery. "These data show why employers are using every type of screening method they can to avoid making poor hiring decisions," according to Denston.

Continued on next page with: But How Accurate is the Data?

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Note: The information in this section appeared in the Winter 2011 edition of the Department of Human Rights newsletter, The Rights Stuff. The newsletter includes additional material related to this topic.