Credit Checks & Legal Issues
According to a story on ABC News online, reporter Russell Goldman offered that “In 2004, some 35 percent of American companies were checking potential employee's credit histories." Since, 2004, that number has most likely risen as business owners and HR professionals want to review credit checks, and job offers for those who have a poor credit history may be looked at as risky to employ.
Still, there are some jobs that may require a good credit history in order to obtain the job such as those in the retail (cash handlers), credit card or banking business.
The legalities and rules behind credit checks, or denying a job due to a poor credit report, even if you have permission from the applicant, are important to follow to the letter to avoid a lawsuit.
For example, Title VII of the Civil Rights Act of 1964 from the Equal Employment Opportunity Commission (EEOC) clearly states if an employer decides not to hire a candidate based “solely or in part" on his or her credit report, they must provide a copy of the credit report to the applicant. Employers who deny a job applicant based on less than stellar credit report must also direct them to or offer up the rules under the Fair Credit Reporting Act. You can find a copy of the Fair Credit Reporting Act here; and it’s wise for employers and HR professionals to keep a copy on hand if jobs denied are based on a poor credit score or history.
Labor laws do vary from state to state and if you’re unsure whether you are allowed to run a credit report as a job pre-screening tool or if there are certain rules that apply in your state, contact a labor law attorney or your local Department of Labor and ask before you implement a credit check process to screen job candidates.
Please be sure to check out the other tips and strategies found in Bright Hub's HR Guide for Recruiting and Retaining Employees.