Credit check for employment stirs debate

Atlanta-based CredAbility has clients who fear they’ve been denied employment based on poor credit reports, including a woman who made it to the final interview stage with a mortgage brokerage firm and submitted to a credit report check, knowing she was behind on mortgage payments. The woman, who did not want to be identified, didn’t get the job.

“It’s hard to say because the potential employer didn’t say, ‘You lost the job because of something on your credit report,’” said John McCosh, CredAbility spokesman. “But with the timing of it, we can see why people reach that conclusion.”

Credit background checks are one of several topics up for EEOC debate in a series of commission hearings examining employment barriers, an EEOC spokeswoman said. Under the Fair Credit Reporting Act, employers are required to receive written authorization from an applicant to run the report and then must provide that person, or employee, with a copy of the information. Similar to the reports a consumer can obtain for free each year through credit reporting agencies, employers receive a report that lists debt. The reports do not, however, give an applicant’s credit score.

Sarah Crawford, senior counsel for the Washington, D.C.-based Lawyers’ Committee for Civil Rights Under Law, testified before the EEOC last week against the use of credit checks. Research indicates African-Americans and Hispanics tend to have poorer credit than whites, and credit background checks, while applied broadly, can have a second-hand effect of screening out minorities, she said.

“I think the assumption that is made is, if somebody is behind on their bills, then it tells something about their integrity or responsibility, but in many cases that assumption is flawed,” Crawford said. “You have somebody who has fallen behind on their bills because they’re out of their job in this economy, and because they’ve fallen behind on their bills, they can’t get a job.”

Credit check supporters say this is only one step of the hiring process for certain industries, such as financial institutions or retail and real estate firms, in which employees handle money or have access to confidential information. Nearly 60 percent of employers use credit background checks in some way, according to the Society of Human Resource Management.

Credit checks typically are performed during the final stages of interviewing, or when an offer has been made, because of the cost involved, said Mike Aitken, SHRM director of government affairs.

“It’s one piece of the puzzle; it’s not the over-riding factor,” Aitken said. “If somebody just lost their job and fell behind on bills, that’s not what they’re looking at. They’re looking at their track record for five or six years. They’re looking at a pattern and practice of not being able to meet their obligations.”

Only 13 percent of businesses use credit background checks on all job candidates in today’s market, compared with 19 percent in 2004, according to SHRM. Another 47 percent said they use credit background checks for selective job candidates, compared with 42 percent in 2004 that reported rarely or sometimes using the checks.

Aitken said credit reports should be applied only in specific instances. For example, a software company that conducted a credit background check on a chief financial officer candidate found that person had $35,000 in gambling debt.

“That was one of those things the employer didn’t want to take a risk with,” Aitken said.

SHRM, however, doesn’t believe credit report checks are necessary for all industries.

“You can’t really argue that a maintenance person or somebody who doesn’t have access to financial information should be having a credit report performed on them; it’s pretty hard to justify that,” Aitken said.

Heather Donnelly, director of operations for Atlanta’s Paces Staffing, said credit background checks aren’t as commonly requested as criminal or social security checks. Credit background checks are typically requested for mid-to-high level accounting or finance positions, she said.

“In certain positions they are looking for someone who is going to manage their money, and they are looking for someone who can show personal responsibility in their own life as well,” Donnelly said.

Crawford said there is little research, however, that demonstrates a correlation between credit and talent.

“To my knowledge there isn’t any research out there that makes the critical link between what shows up on a credit report and information that gets to whether someone will be able to perform the job,” Crawford said.

For that reason, SunTrust mortgage company does not conduct credit background checks, spokesman Hugh Suhr said.

“We researched the issue a number of years ago and did not find sufficient data to support a correlation between a score and job performance and risk,” Suhr said.

The federal government and some states are considering legislation that would prohibit employers from using credit background checks, with certain exceptions.

Congress last year considered House Resolution 3149, which was known as the Equal Employment for All Act and sponsored by Steve Cohen, D-Tenn. Among the co-sponsors, John Lewis, D-Georgia, said the legislation was written to halt what he called discrimination against people who were unemployed because of the bad economy, and had credit standings that suffered as a result. The resolution remains at committee level.

“If people cannot earn some money to pay their bills, they will be in a hole forever,” Lewis said.

Sarah Grathwohl of Roswell submitted to a credit and criminal background check for her former job with a development and real estate company in Athens. The company conducted checks for all job positions, and she didn’t think twice about it. She was hired as an assistant to the CEO and later helped with the company’s hiring process. She never knew of an applicant denied a job because of his or her credit.

Grathwohl, 29, supports the use of credit background checks in some instances, though she still isn’t sure why it was necessary for her former position.

“I think anytime you’re handling anyone else’s money or assets, it makes sense to me, and as a consumer it makes sense to me,” she said. “With my previous employer, it didn’t bother me, but I don’t see that it was extraordinarily necessary or related to what I did at all.”