Update: Are Credit Checks Discriminatory? Some U.S. Senators Say, “Yes.”

A group of U.S. Senators is upping the ante on their bet that most Americans want credit checks banned from the hiring process. Led by Senator Elizabeth Warren (D-MA), the “Equal Employment for All Act of 2015, aims to amend the Fair Credit Reporting Act (FCRA) by “prohibiting the use of consumer credit checks against prospective and current employees for the purpose of making adverse employment decisions.”

The bill stems from the theory that a person’s poor credit history gives no indication about their ability to perform a job well and that credit checks have kept certain groups of people including women, minorities, low-income, students and seniors, from being fairly represented in the workforce.

We told you about the proposed bill in this post from last year. The bill was officially introduced in August and its current status is being read in the Committee on Health, Education, Labor and Pensions.

Senator Warren and Rep. Steve Cohen (D-Tenn.) are taking the fight to the public, too. They recently drafted an op-ed for Time hoping to garner support for their cause. Here’s an excerpt:

“It would help level the playing field for hardworking families who deserve a fair shake,” they write. “Our legislation would prohibit employers from requiring prospective employees to disclose their credit history as part of the job application process, unless the position requires a national security clearance or a credit report is required under state or local law. It makes sure that hiring decisions are based on an individual’s skill and experience—not on past financial struggles. The bill also would stop discrimination against African Americans, Latinos and seniors who are more likely to be hit by bad credit.”

A Federal Trade Commission (FTC) study released in 2013 estimated that as many as one in four Americans have “at least one potentially material error on at least one of their three credit reports.” While about 80 percent of those who sought a correction eventually got the error fixed, there are multiple different credit bureaus that may have to be contacted to address an error, and the process can be convoluted.

Human Resources, Consumer Reporting Agencies, and employment law blogs are tracking this bill closely. It could have major implications on complying with Federal FCRA law, and would certainly increase interest in which industries should be exempt from the change. For example, would applicants in the financial, security and government industries still be required to undergo a credit check?

Would you trust someone to prepare and file your tax return if you knew they had thousands of dollars in delinquent accounts? It can be pretty enticing to siphon off a few dollars here and there to help you get back on top of your finances, like these two ex-cons did.  Background checks, which can include your credit report, help paint a clear picture of the person an employer is considering hiring. We know your money is important to you. It’s important that we help employers protect it for you.

At this point, credit checks aren’t going anywhere. Nearly half of all hiring managers surveyed in 2012 by the Society for Human Resource Management said their company checks candidates’ credit histories. The figure was down from 2010, when a full 60 percent of those surveyed said they use the tactic. And some states are even considering adding financial credit checks to some applicant categories, like Indiana who is exploring requiring credit checks for teachers.

Until the Equal Employment for All Act of 2015 bill moves or stalls, the power to protect your financial literacy still lies in your own hands. You can pull your credit report for free and review it each year. If you find errors, dispute them.

What’s your thoughts on this bill? Is this a good move for American workers, or will it put more employers at risk? Share your thoughts below.

This entry was posted in Background Screening, Criminal Records, General, Human Resources, Identity & Credit, Industry Solutions, News and tagged , , , , , , , , , , , , , , , , , by Patricia Carlson. Bookmark the permalink.

Patricia Carlson is a content writer who specializes in B2C and B2B inbound marketing. She blogs regularly for clients about the background screening and finance industries, and generates newsletters, white papers and email campaigns for a variety of businesses. Patricia also produces a heavy rotation of editorial material for home design, law enforcement, and family magazines. She’s been writing professionally for more than a dozen years, and for Active Screening for more than two of those. Check out LinkedIn for a roster of Patricia’s clients and links to published works. When she’s not interviewing sources or researching trends, she’s living a fast-paced Florida life questioning the antics of her two young children, partner and mischievous cat. Patricia loves to talk tennis and TV on Twitter – give her a shout @pattycfreelance.

 
        
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