The Denver Post reports that Colorado senators have given initial approval to legislation – Senate Bill 3 (SB-3) The “Employment Opportunity Act” – that would restrict businesses in the state from using consumer credit report checks to screen most job applicants if passed. Sponsored by Senator Morgan Carroll (D-Aurora), SB-3 passed on a voice vote and now heads to a final reading before the Senate. If SB-3 is passed by the Senate and the House, Colorado would become the eighth U.S. state to restrict credit checks for employment, joining California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington. The text of SB-3 is available at: SB-3 would limit the use of credit histories in employment screening to only those jobs relevant to the background, such as financial positions that handle a lot of money, the Post reports. In addition, companies required to perform credit checks for federal contracts would be exempt, and would not affect credit scores, which employers are prohibited from acquiring. The bill creates the “Employment Opportunity Act,” which specifies the purposes for which consumer credit information (i.e., consumer credit reports and credit scores) can be used by an employer or potential employer (jointly referred to as “employer”). Specifically, the “Employment Opportunity Act”:

  • Prohibits an employer’s use of consumer credit information for employment purposes if the information is unrelated to the job;
  • Requires an employer to disclose to an employee or applicant for employment (jointly, “employee”) when the employer uses the employee’s consumer credit information to take adverse action against him or her and the particular credit information upon which the employer relied;
  • Authorizes an employee aggrieved by a violation of the above provisions to bring suit for an injunction, damages, or both; and
  • Requires the department of labor and employment to enforce the laws related to employer use of consumer credit information.
Credit report checks of job applicants have become more common in recent years, as has the controversy surrounding the practice. A 2010 survey from the Society for Human Resource Management (SHRM),  “Background Checking: Conducting Credit Background Checks,” revealed that approximately 60 percent of employers surveyed conducted credit checks on some job applicants. More specifically, the survey found that:
  • 13 percent of employers surveyed conducted credit checks on all job candidates.
  • 40 percent of employers surveyed did not conduct any credit checks on job candidates.
  • 47 percent of employers surveyed conducted credit checks on some job candidates for selected jobs.
The SHRM survey also found organizations were more likely to conduct credit checks on job candidates for the following jobs:
  • 91 percent said positions with fiduciary and financial responsibility (handling money, banking, accounting, etc.).
  • 46 percent said senior executive positions (CEO, CFO, etc.).
  • 34 percent said positions with access to highly confidential employee information (salary, benefits, personal data, etc.).
  • 30 percent said positions with access to company or other people’s property or placed in position of financial trust (information technology, administrative services, etc.).
When asked for “primary” reason for conducting credit checks on job candidates, organizations polled in the SHRM survey responded with the following:
  • 54 percent said to reduce theft, embezzlement, and other criminal activity.
  • 27 percent said to reduce legal liability for negligent hiring.
  • 12 percent said to assess the overall trustworthiness of job candidate.
The SHRM Poll “Background Checking: Conducting Credit Background Checks” is available at: Employment Screening Resources (ESR) – a nationwide background check firm accredited by the National Association of Professional Background Screeners (NAPBS), offers the following tips for employers who wish to use credit report checks:
  • Employers should not use credit checks unless there is a clear business justification related to the job in question.
  • Employers should remember some credit reports contain errors and may contain incomplete information.
  • Employers should use extreme caution with credit reports and be aware of both federal and state laws regarding credit report checks.
  • Despite beliefs to the contrary, both employers and jobseekers should realize that employment credit reports DO NOT contain three digit credit scores such as FICO.
As reported earlier on the ESR News blog “Credit Report Background Checks of Job Applicants by Employers Increasingly Regulated by State Laws,” several U.S. states have passed laws in recent years regulating the use of credit reports for employment purposes. California, Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington currently have laws that limit the use of credit report checks by employers for employment purposes, with the most recent law, California Assembly Bill 22 (CA AB 22), taking effect January 1, 2012. This growing trend is Number 2 on the fifth annual ESR Top 10 Trends in Background Checks for 2012. To view the full list of trends, visit: To help job applicants better understand credit checks, a white paper co-written by ESR titled ‘The Use of Credit Reports in Employment Background Screening: An Overview for Job Applicants’ shows the many protections job applicants with employment credit reports. Credit scores are not part of an employment credit report since credit bureaus, credit scoring companies, and background screening companies all recognize that there is no correlation between a credit score and job performance and is simply not provided to employers. The complimentary white paper, ‘The Use of Credit Reports in Employment Background Screening: An Overview for Job Applicants,’ available for download on the ESR website at Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM’ – will continue to monitor the laws regulating credit report use for employment purposes and post updates on the ‘States with Laws Regulating Credit Reports for Employment’ page on the ESR website at: For more information about background checks, visit Employment Screening Resources at or call 415.898.0044. Sources: About Employment Screening Resources (ESR): Employment Screening Resources (ESR) – ‘The Background Check AuthoritySM – provides accurate and actionable information, empowering employers to make informed safe hiring decisions for the benefit for our clients, their employees, and the public. ESR literally wrote the book on background screening with “The Safe Hiring Manual” by Founder and CEO Lester Rosen. ESR is accredited by The National Association of Professional Background Screeners (NAPBS), a distinction held by less than two percent of all screening firms. 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 Employment Screening Resources (ESR), visit or call 415.898.0044. About ESR News: The Employment Screening Resources (ESR) News blog – ESR News – provides employment screening information for employers, recruiters, and jobseekers on a variety of topics including credit reports, criminal records, data privacy, discrimination, E-Verify, jobs reports, legal updates, negligent hiring, workplace violence, and use of search engines and social network sites for background checks. For more information about ESR News or to send comments or questions, please email ESR News Editor Thomas Ahearn at [email protected].]]>