Civil Rights and Labor Groups Seek to End Credit Checks of Job Applicants by Employers

According to a report from HuffingtonPost.com, a coalition of 25 civil rights and labor advocacy groups recently petitioned TransUnion – one of the largest credit-monitoring firms in the United States along with Equifax and Experian and the only privately-held company of the so-called ‘Big Three’ – to stop making credit reports available and selling consumer credit information to employers to use for credit checks of job applicants during the hiring process.

HuffingtonPost.com reports the groups believe employment credit checks have a discriminatory impact on African American and Latino job applicants, can be inaccurate, are not valid predictors of job performance, and that many job seekers are caught in a ‘Catch-22’ situation where they cannot pay their bills because they do not have a job but cannot get a job because of bad credit since they cannot pay their bills. A full list of the groups involved may be found at http://creditcatch22.org/.

Credit checks of job applicants by employers have become more common recently. According to a 2010 survey by the Society for Human Resource Management (SHRM), approximately 60 percent of employers polled conducted credit checks on some job applicants. The survey found that 13 percent of employers surveyed conducted credit checks on all job candidates while 47 percent of employers surveyed considered credit history for candidates for selected jobs such as dealing with finances and personal data. The remaining 40 percent of employers surveyed did not conduct any credit checks.

However, many states have passed laws restricting the use of credit checks by employers. As reported earlier in the ESR News blog ‘California Passes AB 22 Placing Restrictions on Use of Credit Checks by Employers,’ employers or prospective employers in California – with the exception of certain financial institutions – will be prohibited from obtaining consumer credit reports for employment purposes beginning on January 1, 2012 after Governor Jerry Brown recently signed into law Assembly Bill 22 (AB 22).

AB 22 amends Section 1785.20.5 of the Civil Code and add Chapter 3.6 (commencing with Section 1024.5) to Part 2 of Division 2 of the Labor Code, relating to employment, and prohibits employers or prospective employers from obtaining a consumer credit reports for employment purposes unless the position of the person for whom the report is sought is one of the following:

  • A managerial position;
  • A position in the state Department of Justice;
  • A sworn peace officer or other law enforcement position;
  • A position for which the information contained in the report is required by law to be disclosed or obtained;
  • A position that involves regular access to specified personal information for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment;
  • A position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf;
  • A position that involves access to confidential or proprietary information; or
  • A position that involves regular access to $10,000 or more of cash.

AB 22 also requires the written notice informing the person for whom a consumer credit report is sought for employment purposes to also inform that person of the specific reason for obtaining the report. With the passage of AB 22, California now joins Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington as U.S. states that currently limit the use of credit checks by employers. To read the full text AB 22, visit: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110920_enrolled.pdf.

“Employers should not use credit checks unless there is a clear business justification related to the job in question since some credit reports contain errors,” says Attorney Lester Rosen, Founder and CEO of Employment Screening Resources (ESR), a background check company accredited by the National Association of Professional Background Screeners (NAPBS). “Employers should use extreme caution with credit reports and be aware of both federal and states laws.”

To help job applicants better understand credit checks, ESR offers a complimentary white paper, ‘The Use of Credit Reports in Employment Background Screening: An Overview for Job Applicants,’ available for download at http://www.esrcheck.com/Download/. For more information about background checks, visit Employment Screening Resources (ESR) at http://www.ESRcheck.com.

About Employment Screening Resources (ESR):
Employment Screening Resources (ESR) literally wrote the book on background screening with “The Safe Hiring Manual” by ESR founder and CEO Lester Rosen. ESR streamlines the screening process and reduces administrative overhead though its proprietary technology solutions.  ESR is accredited by The National Association of Professional Background Screeners (NAPBS®), a distinction held by less than two percent of all screening firms. This important recognition was achieved by successfully passing a third party audit demonstrating compliance with the NAPBS Background Screening Agency Accreditation Program. By choosing an accredited screening firm like ESR, employers know they have selected an agency that meets the highest industry standards. For more information about ESR, visit http://www.ESRcheck.com.

Sources:
http://www.huffingtonpost.com/2011/10/11/employment-credit-checks_n_1005295.html.
http://www.shrm.org/Research/SurveyFindings/Articles/Pages/BackgroundChecking.aspx.