Democratic senators push for end to pre-employment credit checks

[Cincinnatus]

WASHINGTON — Hank Ronan knew he would get the job. He had sailed through three rounds of interviews and hit it off with the doctors at the diagnostic center in Annandale, Va., where he had applied to be a driver for $11 an hour.
 
Shuttling patients to appointments was a world away from his 20 years as a software engineer, but it was the best that Ronan could find after being laid off in 2011. He was eager to get back to work and granted the doctor’s office permission to run a credit check. Ronan never heard back, he said Tuesday in an interview.
 
He wouldn’t have thought much of it, but months earlier Ronan had received a rejection letter from a state-run liquor store that cited his poor credit as the reason he was not hired as a clerk. With about $20,000 in credit card debt, he said, he knew his finances were a mess, but he didn’t know that it could cost him a job.
 
“I had no idea that my credit could do this,” said Ronan, 68, who now works part time as a courier. “The older you get the harder it is to find a job, and this just makes it worse.”
 
Ronan’s experience is at the heart of legislation introduced Tuesday by a group of Senate Democrats seeking to bar companies from using credit checks to weed out job applicants. Lawmakers say the practice contributes to long-term unemployment and disproportionately affects women and minorities whose credit was damaged during the financial crisis.  

“No one should be denied the chance to compete for a job because of a credit report that bears no relationship to job performance,” Sen. Elizabeth Warren, D-Mass., one of seven lawmakers sponsoring the Equal Employment for All Act, said during a call with reporters. “For millions of working families, a hard personal blow translates into a hard financial blow that will show up for years in a credit report.”
 
The bill, which exempts jobs that require a national security clearance, aims to stop employers from disqualifying would-be hires based on poor credit. In the face of stubbornly high unemployment, lawmakers say the continued use of credit reports could stymie economic growth.
 
Companies can legally check a credit history under the Fair Credit Reporting Act, which requires a job applicant’s consent. Forty-seven percent of employers use credit checks in their hiring decisions, according to a 2012 survey by the Society for Human Resource Management.

[emphasis added]

It also adversely impacts those who do not control their spending habits.

http://www.pottsmerc.com/general-news/20131218/democratic-senators-push-for-end-to-pre-employment-credit-checks

[raml]

I do believe it is a good thing to stop this. I agree that a lay off can have an adverse affect on a persons credit score. I worked in insurance and we used it there and people with bad credit had to pay the high rates due only to their credit report. They could have an immaculate driving record but they still didn't quality for good premium rates. Things do happen beyond a persons control that can effect their credit reports not just out of control spending.  I saw this over and over again when I worked and I really didn't think it was fair. They also used it in hiring agents in fact every job I have ever gotten they checked my credit scores. I was lucky mine were good but good people have bad times and all you are doing is causing them to have even worse times. There are I am sure people who cause their own problems but I found those people didn't have a good driving record either or in home insurance had way to many claims and that should be the reason to put premiums higher not their credit scores. I hope they succeed in stopping this.

[truth_seeker]

A lot of good people were damaged badly in the financial crash. I saw it from the real estate side.

It was NOT just no down, crappy credit people who got clobbered when prices dropped, and mortgage rates reset. (A 30% drop in prices gave people who had made 20-25% down payments, zero equity.)

And a lot of good people lost jobs, couldn't find jobs, and their credit got worse.

Anybody self-righteously condemning these types, ought to be grateful of not having it happen to them.

[Oceander]

Just curious but just what, exactly, is served by getting a credit check on a prospective employee?

[Cincinnatus]

Credit reports are but one piece of the puzzle. If a job candidate otherwise seems qualified and has a good work history, issues such as a poor credit report, especially in this Obama economy, can be resolved or explained during an interview. But to throw out credit checks completely is to throw out the baby with the bath water. For some people a bad credit history is indicative of a lack of personal control and a potential employer has a right to that information. 

[GourmetDan]

For some people a bad credit history is indicative of a lack of personal control and a potential employer has a right to that information.

And the garnishments are a real pain for the payroll department...

[truth_seeker]

Credit reports are but one piece of the puzzle. If a job candidate otherwise seems qualified and has a good work history, issues such as a poor credit report, especially in this Obama economy, can be resolved or explained during an interview. But to throw out credit checks completely is to throw out the baby with the bath water. For some people a bad credit history is indicative of a lack of personal control and a potential employer has a right to that information.

I did a lot of hiring and firing in the 197s and 1980s and we did not use credit reports. I do understand it could be part of the story about a person's total character.

But to disqualify a candidate in this day, solely for credit scores, is quite unfair in my mind.

[ABX]

Just curious but just what, exactly, is served by getting a credit check on a prospective employee?

Financial risk. It usually involves jobs that handle customer's financial data. If you have someone who is in extreme financial distress, has a history of poor financial decisions, and combined with other issues found during pre-employment screening, it may be someone you would want to think twice about entrusting your business to.  I support this type of screening.

[ABX]

I did a lot of hiring and firing in the 197s and 1980s and we did not use credit reports. I do understand it could be part of the story about a person's total character.

But to disqualify a candidate in this day, solely for credit scores, is quite unfair in my mind.

I've never seen it solely based on that unless it pulls up suspected fraud.

[Rapunzel]

Financial risk. It usually involves jobs that handle customer's financial data. If you have someone who is in extreme financial distress, has a history of poor financial decisions, and combined with other issues found during pre-employment screening, it may be someone you would want to think twice about entrusting your business to.  I support this type of screening.

Over the last few years I've been astonished at the arrests of County employees who embezzled tons of money from the county coffers.. one was over $300K before being caught......    I also remember a guy in the purchasing department years ago who was frog-marched out after it was revealed he was making purchases from a fake company and he was the fake company - he used that scam for a long time until an internal audit caught up with him... this is why audits are so important and why the auditors need to be both internal as well as outside auditors to make certain everything is above-board.

[GourmetDan]

I've never seen it solely based on that unless it pulls up suspected fraud.

I'm sure it's not solely based on that.  With a plethora of candidates, it's easy to move to the next one...

[Lipstick on a Hillary]

A lot of good people were damaged badly in the financial crash. I saw it from the real estate side.

It was NOT just no down, crappy credit people who got clobbered when prices dropped, and mortgage rates reset. (A 30% drop in prices gave people who had made 20-25% down payments, zero equity.)

And a lot of good people lost jobs, couldn't find jobs, and their credit got worse.

Anybody self-righteously condemning these types, ought to be grateful of not having it happen to them.

A lot of those people were sitting on some horrendously overpriced real estate.  That crash knocked a lot of value down to where it should have been in the first place.

[EC]

A lot of those people were sitting on some horrendously overpriced real estate.  That crash knocked a lot of value down to where it should have been in the first place.

It's not just that. Some people have a terrible credit score because they don't have enough details in their credit file for Experian to score them accurately. We have not used a credit card in 25 years. Never taken out a loan for anything. Our utility meters are pay in advance. Have no mortgage and never had one. Had one overdraft, once, 16 years ago.

we'd be turned down for a payday loan.

[Oceander]

Financial risk. It usually involves jobs that handle customer's financial data. If you have someone who is in extreme financial distress, has a history of poor financial decisions, and combined with other issues found during pre-employment screening, it may be someone you would want to think twice about entrusting your business to.  I support this type of screening.

Fine; but there's a definite link between the two; however, credit checks are used by employers where that concern is either collateral or nonexistent; that practice should be prohibited.

[truth_seeker]

I've also met people, professionally and personally, who went through nasty divorces, and the spouse messed up the credit for both.

[raml]

Banks require one and that I believe in because anyone working with great sums of money should be checked if they are in a jam money wise they could be tempted to steal. A felon also can't work for a bank or financial institution even if the company is just owned by a bank. They do FBI fingerprint checks. I worked for JP Morgan after a company I worked for was bought out by them and was surprised when a few of my co workers were let go after the buy out but it turned out they had a felony on their record although it had been a long long time ago when they were still in their teens and they had been working with me since the company had opened and were good workers. I understand that but don't see why a regular job would need a credit check and I also don't see why insurance companies use it as part of their premium structure it should be based on how many claims have been made or driving records.