Using Credit Checks to Screen Employment Applicants

Using Credit Checks to Screen Employment Applicants

The Equal Employment Opportunity Commission has taken a harder look at the practice of checking the credit of potential employees.  The EEOC held a hearing last month to get a variety of viewpoints on the issue.  The human aspect cries out for reform.   As high unemployment continues, many people have suffered dings or worse to their credit report.  A repossessed car, late payments on credit card, a foreclosure, all make a credit report look bad.  But if these were caused by unexpected unemployment, does the negative rating predict a bad employee?  One might say that no, having been through these hardships someone may work hard to be the best, and avoid another layoff.

The employer’s point of view often hinges on the possibility that the credit report may flag someone with a history of money problems, which may indicate the embezzler-to-be.  There are some problems with this logic.  First of all, many employees are not in the position to deal with the employee’s money.  Secondly, skilled embezzlers probably do not have money problems of the kind that show up on credit reports.  Third, the use of credit reports weeds out African-Americans and Hispanics at a disproportionate rate, according to the EEOC.  It may also hurt recently divorced women, young workers, and people who have had large medical bills.

Speakers at the hearing mentioned that the Fair Credit Reporting Act has safeguards, including requiring the applicants to authorize the check, and requiring the employer who used the report to reject the application to say so.  Cold comfort to an applicant faced with a sign this or else ultimatum.

http://www.eeoc.gov/eeoc/meetings/10-20-10/index.cfm

Using such a blunt tool does not belong in a meritocracy.  A law pending in Congress, the Equal Employment for All Act,would add safeguards but still allow use of credit reports to screen applicants for a few categories of jobs, such as national security and financial institution supervisors. It is languishing in the House, although a hearing was held by the Subcommittee on Financial Institutions and Consumer Credit.

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