Tue, May 6th, 2014 - 10:33 am - By Gordon Basichis
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After the economy took a downturn and the U.S. and the rest of the world experienced one of the worst Recessions, personal credit took a nosedive. As the housing market went upside down and people who paid way too much above actual value found themselves in foreclosure, even good credit went to lousy credit in no time at all. Couple that with the stark reality that people were living on credit and consequently living way over their heads and you have a problem.
So now there is hue and cry that credit reports inhibit employers from hiring people with poor credit. There are arguments that the job applicants do not have the ability to defend themselves and are not notified through a pre-adverse action letter so that they can address any discrepancies in their credit reports. There are arguments that lower income employment candidates are more affected because they tend to have bad credit.
As the article in the Consumer Eagle indicates…”As criticism of the practice has mounted, at least 10 states have passed legislation restricting its use, and bills have been brought in Congress to do the same on a national level. Last December, Sen. Elizabeth Warren (D-MA) introduced the Equal Employment for All Act, which would allow credit checks in hiring only for positions that require national security clearance. In a written statement issued at the time she filed the legislation, Warren said, “This is about basic fairness – let people compete on the merits, not on whether they already have enough money to pay their bills.”
As it now stands, even the states restricting employment credit reports allow for special circumstances, such as for financially related positions, where sensitive data is available and for compliance with government compliance. As as the Human Resources organization, SHRM, points out, most employers still hire people with bad credit. Another fact, from we see at Corra Group, ten percent or less of our clients even run employment credit reports for any reason.
Employment credit reports pose a complex and difficult list of questions. Many of those questions are based address in terms of how many employers actually conduct background checks and what in all reality in terms of hiring practices. And more importantly, are employers following the compliance standards as provided by the FCRA? If not, then this is terribly unfair to job applicants. Whatever hiring policy, employers need to give their employment candidates a chance to respond to any records found in the employment screening report.