State lawmakers in Maryland have proposed legislation that would limit the ability of employers to run credit checks using credit reports and credit histories of employees and job applicants for employment purposes in response to complaints from job seekers in the state who said they were denied jobs after their would-be employers learned about their low credit scores, according to an article in The Baltimore Sun.
The legislation – SB 132 – ‘Job Applicant Fairness Act’ – would prohibit employers in Maryland from using the credit report or credit history of an employee or applicant for employment other than for positions of fiduciary responsibility. However, the Act would not prohibit an employer from performing employment-related background checks. More specifically, SB 132 would:
- Prohibit employers from using credit reports or credit histories as a basis to deny employment to a job applicant or penalize or discharge an existing employee.
- Allow employers handling sensitive data to run credit checks.
- Allow employers to run credit checks on job applicants for high-level positions such as Chief Financial Officers (CFOs).
- Penalize violators $500 for a first-time offense and $2,500 for repeat violations.
If SB 132 becomes law, Maryland would join four other states – Hawaii, Washington, Oregon, and most recently Illinois – that currently have laws limiting the use of credit checks by employers on employees and job applicants for employment screening. The Illinois Employee Credit Privacy Act took effect January 1, 2011 and bans employers from using credit reports except in specific circumstances.
A 2010 survey by the Society for Human Resource Management (SHRM) found that while 60 percent of employers reported using credit checks during the pre-employment screening process, only 13 percent of those employers performed credit checks on all job applicants while 47 percent used credit checks only on selected candidates and mostly for jobs with access to finances or sensitive data.
Another survey revealed more than half of consumers approved of the idea of banning the use of job applicant credit reports by employers for employment screening. A telephone poll survey conducted for Credit.com interviewed 1,004 consumers about whether they agreed with a proposed ban on the practice of employers checking credit report as part of background screening for employment:
- 53.5 percent of consumers surveyed said they agreed with a proposed ban on employers using credit reports to screen job applicants.
- 38.3 percent of consumers surveyed said they were OK with allowing the practice of employers using credit reports to screen job applicants.
- 8.2 percent of consumers surveyed said they didn’t know.
- More women (55 percent) opposed the use of credit report background checks for employment than men (51.7 percent).
The use of credit report checks by employers for employment screening of job applicants is so controversial it was chosen the #1 Trend in the Fourth Annual ‘Top Ten Trends in Background Screening for 2011’ by Employment Screening Resources (ESR), a leading background check provider accredited by the National Association of Professional Background Screeners (NAPBS).
ESR President Lester Rosen advises employers not to use credit report background checks unless there is a clear business justification related to the job in question since some credit reports may contain errors. Rosen also says that most consumers do not realize that there is a special version of the credit report used for employment purposes that does contain information such as the applicant’s age or credit score.
To help job seekers understand credit checks, ESR also supplied research for a white paper – ‘The Use of Credit Reports in Employment Background Screening: An Overview for Job Applicants’ – available on NAPBS at:
The Fourth Annual Employment Screening Resources (ESR) ‘Top Ten Trends in Background Screening for 2011’ is available at http://www.esrcheck.com/Top-Ten-Trends-In-Background-Screening-2011.php. For more information about background checks and credit reports, visit Employment Screening Resources (ESR) at http://www.ESRcheck.com.