Tag Archives: credit reports

Using Criminal Records and Credit Reports for Screening

What are the practical and legal considerations for employers that use criminal records and credit reports for applicant selection? This is the fifth and final installment of the Employment Screening Resources (ESR) Background Check Trends of 2011 Review features the number two trend, using criminal records, and the number one top ranked background check trend of the year, the use of job applicant credit reports. To view previous installments of the 2011 ESR Background Check Trends Review, visit Part 1, Part 2, Part 3, and Part 4.

  • Number 2 ESR Background Check Trend for 2011: Questions about Criminal Records of Job Applicants Become More Difficult for Employers to Ask.
  • Number 1 ESR Background Check Trend for 2011: Controversy over Whether Employers Using Credit Reports for Employment Screening is Discriminatory Increases.

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California Bill Eliminating Credit Checks by Employers during Hiring Process Passes State Assembly and Heads to Senate

A bill in California – AB 22 – sponsored by Assemblymember Tony Mendoza (D-56th District) that would ban the use of credit report background checks by employers during the hiring process has passed in the State Assembly with a vote of 45 to 29 and now heads to the Senate Labor and Industrial Relations Committee. Mendoza’s earlier attempts at similar legislation in the past – AB 482 (2010) and AB 943 (2009) – were both vetoed by former Governor Arnold Schwarzenegger. Continue reading

Job Applicants Need to Learn about Credit Report Checks for Employment Screening when Looking for Work

Since a 2010 survey released by the Society for Human Resource Management (SHRM) – ‘Background Checking: Conducting Credit Background Checks’ – found that 13 percent of the companies surveyed checked the credit reports of all job candidates while 47 percent checked the credit reports of some job candidates, many job seekers looking for work are wondering if their bad credit will affect the outcome of their job search. These jobs seekers need to know that there are limits to what employers can see in employment-related credit checks and how they can use that credit information, according to the article ‘Can Bad Credit Ruin Your Job Search?’ by Susan Johnston on Bankrate.com. Continue reading

Maryland Latest US State to Place Restrictions on Use of Credit Checks by Employers

Joining four other U.S. states – Hawaii, Illinois, Oregon, and Washington – prohibiting the use of credit information by employers, Maryland has enacted new legislation placing restrictions on so-called credit checks by employers that use the credit report or credit history of job applicants or employees for employment decisions. The law, known as the ‘Job Applicant Fairness Act,’ was signed by Maryland Governor Martin O’Malley in April of 2011 and will take effect on October 1, 2011. Continue reading

Many US States Considering Bills Limiting Use of Credit Reports for Employment Screening Background Checks

While only four U.S. states – Hawaii, Oregon, Washington, and most recently Illinois – currently have laws limiting or prohibiting credit checks by employers on job applicants and employees, lawmakers in many U.S. states are currently proposing legislation restricting the use of credit reports for employment screening background checks.

In all, lawmakers in 18 U.S. states are considering bills that limit the use of credit report data for employment screening. These states include: California, Connecticut, Florida, Georgia, Indiana, Kentucky, Maryland, Michigan, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, Ohio, Pennsylvania, Texas, and Vermont. Continue reading

Maryland Legislation Would Limit Credit Checks by Employers on Job Applicants

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. Continue reading

Survey Reveals More than Half of Consumers Want to Ban Credit Report Checks by Employers

More than half of consumers approve of the idea of banning the use of job applicant credit reports by employers for employment screening, according to a recent survey.

A telephone poll survey conducted for Credit.com by GfK Custom Research North America from January 14, 2011 to January 16, 2011 interviewed 1,004 consumers about:

Employers have the right, with your permission, to check your credit report as part of background screening for employment. A number of lawmakers are interested in banning this practice – do you… Continue reading

Colorado Bill Would Severely Limit Use of Credit Reports in Employment Screening

A proposed Colorado law would restrict the use of credit reports of job applicants by employers to certain situations, and make employers that use the information adversely indicate what information they relied upon in the credit report to make their decision. Continue reading

Three Credit Report Resellers Settle FTC Charges for Not Protecting Personal Information of Consumers

By Lester Rosen, Employment Screening Resources (ESR) President & Thomas Ahearn, ESR News Editor

In the Federal Trade Commission’s (FTC) first cases against credit report resellers for the data security failures of their clients, three companies that resell credit reports of consumers have agreed to settle FTC charges that they did not take reasonable steps to protect personal information of consumers and allowed computer hackers to access that personal information, according to a recent news release from the FTC.

Administrative complaints issued by the FTC showed the three credit report resellers bought credit reports from the three nationwide consumer reporting agencies – Equifax, Experian, and TransUnion – and added them to reports to sell to determine eligibility for credit of consumers. Because these three resellers allegedly allowed clients to access these reports without basic security measures such as firewalls and updated antivirus software, hackers accessed more than 1,800 credit reports without authorization through the computer networks of clients. The three credit report resellers also allegedly did not make reasonable efforts to protect against future security even after becoming aware of these data breaches.

The three credit report resellers are charged with violating the Fair Credit Reporting Act (FCRA) by:

  • Failing to protect their internet portals and thereby furnishing credit reports to hackers who lacked a permissible purpose to have them,
  • Failing to maintain reasonable procedures to limit the furnishing of credit reports for such purposes, and
  • Furnishing credit reports when they had reasonable grounds for believing the reports would not be used for a permissible purpose.

The failure of the three credit report resellers to protect personal information of consumers also allegedly violated the FCRA. In addition, the credit report resellers allegedly violated the Gramm-Leach-Bliley Safeguards Rule by failing to:

  • Design and implement information safeguards to control the risks to consumer information;
  • Regularly test or monitor the effectiveness of their controls and procedures; to evaluate and adjust their information security programs in light of known or identified risks; and
  • Have comprehensive information security programs.

The proposed settlement, part of the ongoing campaign of the FTC to protect the personal information of consumers, would require the three credit report resellers to:

  • Have comprehensive information security programs designed to protect the security, confidentiality, and integrity of the personal information of consumers, including information accessible to clients;
  • Obtain independent audits of their security programs, every other year for 20 years;
  • Furnish credit reports only to those with a permissible purpose; and
  • Maintain reasonable procedures to limit the furnishing of credit reports to those with a permissible purpose.

These cases show that the FTC will call for imposition of civil penalties against resellers of consumer reports who do not take adequate measures to fulfill their obligations to protect information contained in consumer reports as required by the FCRA. These cases also send a strong message that companies giving their clients online access to sensitive information of consumers must have reasonable procedures to secure that information.

Consumer protection through data security makes up a critical part of the National Association of Professional Background Screeners (NAPBS) accreditation process. Since its founding in 2003, the NAPBS has believed that there is a strong need for a singular cohesive industry standard and created the Background Screening Agency Accreditation Program (BSAAP). Governed by a strict professional standard composed of requirements and measurements, the BSAAP is becoming a widely recognized seal of approval that brings national recognition to background screening organizations – also referred to as Consumer Reporting Agencies (CRAs) – that will stand as the industry “seal” representing a background screening organization’s commitment to excellence, accountability, high professional standards, and continued improvement.

The NAPBS Background Screening Credentialing Council (BSCC) oversees the application process and is the governing accreditation body that will ensure the background screening organizations seeking accreditation meet or exceed a measurable standard of competence. To become accredited, a CRA must pass an onsite audit of its policies and procedures as they relate to six critical areas of the BSAAP:

  • ‘Section 1: Consumer Protection’ includes standards for: Information Security Policy; Data Security; Intrusion, Detection and Response; Stored Data Security; Password Protocol; Electronic Access Control; Physical Security; Consumer Information Privacy Policy; Unauthorized Browsing; Record Destruction; Consumer Disputes; Sensitive Data Masking; and Database Criminal Records.
  • ‘Section 2: Legal Compliance’ includes standards for: Designated Compliance Person(s); State Consumer Reporting Laws; Driver Privacy Protection Act (DPPA); State Implemented DPPA Compliance; Integrity; Prescribed Notices; and Certification from Client.
  • ‘Section 3: Client Education’ includes standards for: Client Legal Responsibilities; Client Required Documents; Truth in Advertising; Adverse Action; Legal Counsel; Understanding Consumer Reports; and Information Protection.
  • ‘Section 4: Product Standards’ includes standards for: Public Record Researcher Agreement; Vetting Requirement; Public Record Researcher Certification; Errors and Omissions Coverage; Information Security; Auditing Procedures; Identification Confirmation; and Jurisdictional Knowledge.
  • ‘Section 5: Service Standards’ includes standards for: Verification Accuracy; Current Employment; Diploma Mills; Procedural Disclosures; Verification Databases; Use of Stored Data; Documentation of Verification Attempts; Outsourced Verification Services; Conflicting Data; Professional Conduct; and Authorized Recipient.
  • ‘Section 6: General Business Practices’ includes standards for: Character; Insurance; Client Credentialing; Vendor Credentialing; Consumer Credentialing; Document Management; Employee Certification; Worker Training; Visitor Security; Employee Criminal History; Quality Assurance; and Certification.

Employment Screening Resources (ESR) is formally recognized as accredited by the National Association of Professional Background Screeners (NAPBS) Background Screening Credentialing Council (BSCC) for successfully proving compliance with the Background Screening Agency Accreditation Program (BSAAP). For more information, visit Employment Screening Resources (ESR) at http://www.ESRcheck.com


Use of Credit Reports and Criminal Records for Employment Screening comes under Scrutiny

By Thomas Ahearn, Employment Screening Resources (ESR) News Editor

An article in the February 2011 issue of the Society for Human Resource Management’s (SHRM) HR Magazine‘Close Up On Screening’ – describes how employers are scrambling to adjust to changes in the myriad of state and federal laws that govern pre-employment background screening due to increased scrutiny by legislators and policy enforcers on the use of credit reports and criminal records in hiring decisions.

For examples, Illinois recently became the fourth state — after Hawaii, Oregon, and Washington — to restrict the use of credit histories in hiring decisions, while Massachusetts became the second state, in addition to Hawaii, to prohibit private employers from asking about criminal records of job applicants on initial written job applications.

However, contrary to public opinion, a 2010 survey from SHRM – ‘Conducting Credit Background Checks’ – showed credit histories were used sparingly and wisely in hiring decisions.

“The perception that employers are ordering massive amounts of credit reports is nothing like the truth,” said Lester Rosen, President of San Francisco-area background check provider Employment Screening Resources (ESR), who was quoted in the HR Magazine article.

According to the SHRM survey on credit background checks, when respondents were asked if their organization or an agency hired by their organization conducted credit background checks for any job candidates by reviewing their credit reports:

  • 47 percent responded they performed credit background checks on selected job candidates.
  • 40 percent responded they did not perform credit background checks on any job candidates.
  • 13 percent responded they performed credit background checks on all job candidates.

Regarding which categories of job candidates that organizations conducted credit background checks on, the SHRM survey revealed that 91 percent of “job candidates for positions with fiduciary and financial responsibility” underwent credit background checks.

As for restrictions on criminal records, the SHRM article indicates at least two dozen cities and counties and five states have narrowed questions on their job applications to cover only felony convictions or have stopped asking about criminal history entirely and have “banned the box,” a reference to removing the boxes on applications that job applicants must check if they have even been convicted of a crime. 

“With ‘ban the box’, applicants can be considered without pre-judging,” said Rosen, the author of ‘The Safe Hiring Manual – The Complete Guide to Keeping Criminals, Terrorists, and Imposters Out of Your Workplace,’ a comprehensive guide to background checks. “From a government point of view, it makes sense to get people back to work and to avoid the extra costs of social services. Private employers prefer to ask upfront.”

Furthermore, while employers conduct criminal background checks to guarantee safety in the workplace and to avoid negligent hiring lawsuits, they may attract attention from the U.S. Equal Employment Opportunity Commission (EEOC) if they are not careful in doing so. The article noted that while procedural consistency is important throughout an organization, criteria consistency is important within job groups.

“Not all janitors are background screened the way you screen accountants, but janitors should be screened consistently with janitors,” Rosen explained in the article. “Employers get in trouble when they engage in automated decision-making. There always should be a human review to make sure you’re making the right decision.”

Rosen added that while many employers know the Fair Credit Reporting Act (FCRA) contains procedures for conducting credit background checks, some are unaware the FCRA also covers criminal background checks and offers specific “adverse action” procedures an employer must follow if a background check results in a denial of employment for a job applicant.

As a result, many employers are turning to an outsourced background screening and safe hiring partner to establish protocols and consistent practices while also helping to eliminate inappropriate use of screening results.

“A good background-screening partner makes sure the employer is in compliance with the act and other laws, abides by adverse action rules, conducts consistent checks within job groups, and follows EEOC guidelines for using criminal reports,” Rosen said.

To learn more about background checks, visit the Employment Screening Resources (ESR) website at http://www.ESRcheck.com and read more about ‘credit reports’ and ‘criminal records’ on the ESR News Blog

Founded in 1996 in the San Francisco area, Employment Screening Resources (ESR) wrote the book on background checks with ‘The Safe Hiring Manual’ by ESR founder and President Lester Rosen and is accredited by The National Association of Professional Background Screeners (NAPBS®) . To learn more about Employment Screening Resources, visit http://www.ESRcheck.com or contact Jared Callahan, ESR Director of Client Relations, at 415.898.0044 or jcallahan@ESRcheck.com.