Employer Use of Credit Reports in Hiring Under Review by States

The Wall Street Journal reports today, October 21, 2010, that the use of credit reports or credit histories of job applicants, "a common practice among employers– is coming under fire." Employer Credit Checks on Job Seekers Draw Scrutiny, by Sarah Murray, WSJ_Article_Link. Employers claim that the use of credit reports in hiring is necessary to "evaluate candidates and protect against fraud." One of the underlying concerns in the use of credit reports for job applicants, the Journal reports, "is that poor credit could become a barrier to landing a job." Another concern is that the use of credit reports has the potential for discriminatory impact on hiring such that the Equal Employment Opportunity Commission held a hearing on October 20, 2010, to listen to testimony from advocates on both sides of this issue. Chi Chi Wu, counsel for the National Consumer Law Center, testified that the practice "is both harmful and unfair to American workers."

Although proponents of using credit reports for employment contend that these reports "are an important screening tool for employers intend to be used sparingly," the Journal reports that a study conducted by the Society for Human Resource Management "showed 60% of employers used credit checks to that job candidates. Of those, 13% use them for all candidates."

My own comments on the issue raised in this article is that whether or not you think credit history should be used for evaluating job applicants, it is important for all of us to ensure our credit reports are accurate. Inaccurate, negative information on credit reports can impact you in so many ways, we should all take advantage of the federal law that requires national consumer reporting agencies such as Equifax, Experian and Trans Union to provide a consumer his or her own credit report upon request for free. We are all entitled to this free report from each agency once in every 12 month period. You can order your free report for the website established by order of the Federal Trade Commission act www.annualcreditreport.com.

I would also note that in the 2009-2010 legislative session for Wisconsin, a bill was proposed to prohibit discrimination in employment based on one’s credit history with limited exceptions for certain types of jobs. Unfortunately, the bill never made it to the legislative floor. Hopefully, the building reintroduced in the 2010-2011 session.

Wisconsin Legislature Does Not Pass Credit Discrimination in Employment Law

The 2009 Wisconsin legislature did not vote on AB-367, a bill that would have prohibited discrimination in employment based on credit history. The bill just did not get to the floor in time for a vote. It made it out of the Assembly, but not the Senate. This bill would have made Wisconsin one of a handful of states across the country that recognized the need for credit discrimination laws due to the recession we are in and the impact the recession has on many people that lost their jobs, and as a result, suffered severe financial losses and harm to their credit.