Representative Steve Cohen (D – Tennessee) has introduced legislation (H.R. 645) Equal Employment Act for All that would amend the Fair Credit Reporting Act and prohibit the use of credit reports for employment screening purposes or making adverse action decisions. Currently there are eight states (California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont, and Washington) that have highly restricted the use of credit reports. Of course this law, if passed, would deny employers in all states the ability to use credit reports for Employment
There would be a few exceptions including the following:
- (A)When the consumer applies for, or currently holds, employment that requires national security or FDIC clearance.
- (B) When the consumer applies for, or currently holds, employment with a State or local government agency which otherwise requires use of a consumer report.
- (C) When the consumer applies for, or currently holds, a supervisory, managerial, professional, or executive position at a financial institution.
- (D) When otherwise required by law.
There is an ongoing debate as to the use of credit reporting for conducting pre-employment background checks. Many employers would argue that it is necessary particularly when considering applicants for positions that are related to accounting or financial positions where the applicant has access to certain financial information or cash. These companies believe the way someone manages their own personal finances should be a factor to consider in the vetting process.
Opponents say it unfairly burdens individuals who for a variety of reasons may have poor credit due to unforeseen circumstances especially with the Great Recession that has left so many jobless for extended periods of time. Furthermore it causes further barriers to employment when their lack of employment likely contributed to the credit issues.
The Equal Opportunity Employment Commission has repeatedly said the use of credit reports impacts a minority group and women and this can be seen as an unintended bias towards this group.
There are many techniques companies can use to effectively screen candidates and whether or not they use credit reports is subject to various opinions. The pre employment screening process should always start with a thorough criminal background check, employment history search and industry or job specific related searches such as driving records when appropriate.