California Attempts to Ban Credit Reports for Employment Screening
The California State Senate is currently working on bill AB 2918, which will extremely limit the use of credit reports for pre-employment screening purposes. If passed, credit reports will only be allowed for positions which receive high compensation or for law enforcement positions in which employees will be working with or handling money.
This bill, if passed, will eliminate the ability of employers to check their employees' credit when hiring for positions that deal with the handling of money. This would include employees who would have access to cash, merchandise and clients' personal information, such as credit card numbers.
As it is not legal to use a FICO score to determine employment, pre-employment credit reports do not record that information. Rather, they give an employer the ability to see how a potential employee handles their finances, painting a picture of their responsibility and character. In addition, a pre-employment credit report does not deduct points from a person's credit score.
So why is California trying to ban this access?
Assemblywoman, Sally Lieber (D), introduced this bill on 02/22/2008. It went through its second reading in the Senate on 08/19/2008. Lieber's supporting argument was as follows:
"In the past, only banks and financial services companies routinely ran credit checks on potential employees. But employers in other sectors increasingly are including them in the screening process in an attempt to assess applicants' personality traits such as honesty and integrity. United States employers' use of credit checks increased fifty-five percent over the past five years, according to one recent study. This trend makes it harder for people who are laid off, newly divorced, or saddled with student loans to find full-time jobs. The employers' view may be that these people are irresponsible deadbeats, but there can be many contributing reasons such as identity theft or large medical bills. Credit reports were not designed as predictors of employability, and people who have thin credit files - students, young workers, the poor, the elderly - tend to be at a disadvantage because their reports do not predict how they will behave in the future."
The California Association of Licensed Private Investigators spoke in opposition of the bill:
"AB 2918 would prohibit the use of information which is pertinent to evaluating the trustworthiness, integrity, and responsibility of the individual. This is critical in situations where the person is being considered for a position where funds, personal information, and/or confidential business information will be involved. It is important to note that the information contained in a report issued to an employer by a credit bureau is different than the information contained in a consumer credit report that is used for an evaluation of the individual's creditworthiness. The report issued to employers does not contain FICO credit scores or account numbers. Some examples of situations where consumer credit report information is important are: retail and food establishments where the employees will be handling money, property management companies where the employees will be sent into residences, sometimes when the tenants are not home, as well as housecleaning services, hotels, motels, arid others, and parking lot attendants, who collect large sums of money with no supervision."
We spoke with Christopher Ballas, CEO of Backgrounds Online, who stated, "Any position within a company has the capacity to be a potential liability, from CEO to an entry level job. Why not allow employers, who in the end will bear the burden of the actions of their employees, to make sound and informed decisions? A pre-employment credit report is a valuable piece of information to employers that are looking to place the best candidate in the appropriate position."
Status, voting and the bill's history can be viewed here.
This bill, if passed, will eliminate the ability of employers to check their employees' credit when hiring for positions that deal with the handling of money. This would include employees who would have access to cash, merchandise and clients' personal information, such as credit card numbers.
As it is not legal to use a FICO score to determine employment, pre-employment credit reports do not record that information. Rather, they give an employer the ability to see how a potential employee handles their finances, painting a picture of their responsibility and character. In addition, a pre-employment credit report does not deduct points from a person's credit score.
So why is California trying to ban this access?
Assemblywoman, Sally Lieber (D), introduced this bill on 02/22/2008. It went through its second reading in the Senate on 08/19/2008. Lieber's supporting argument was as follows:
"In the past, only banks and financial services companies routinely ran credit checks on potential employees. But employers in other sectors increasingly are including them in the screening process in an attempt to assess applicants' personality traits such as honesty and integrity. United States employers' use of credit checks increased fifty-five percent over the past five years, according to one recent study. This trend makes it harder for people who are laid off, newly divorced, or saddled with student loans to find full-time jobs. The employers' view may be that these people are irresponsible deadbeats, but there can be many contributing reasons such as identity theft or large medical bills. Credit reports were not designed as predictors of employability, and people who have thin credit files - students, young workers, the poor, the elderly - tend to be at a disadvantage because their reports do not predict how they will behave in the future."
The California Association of Licensed Private Investigators spoke in opposition of the bill:
"AB 2918 would prohibit the use of information which is pertinent to evaluating the trustworthiness, integrity, and responsibility of the individual. This is critical in situations where the person is being considered for a position where funds, personal information, and/or confidential business information will be involved. It is important to note that the information contained in a report issued to an employer by a credit bureau is different than the information contained in a consumer credit report that is used for an evaluation of the individual's creditworthiness. The report issued to employers does not contain FICO credit scores or account numbers. Some examples of situations where consumer credit report information is important are: retail and food establishments where the employees will be handling money, property management companies where the employees will be sent into residences, sometimes when the tenants are not home, as well as housecleaning services, hotels, motels, arid others, and parking lot attendants, who collect large sums of money with no supervision."
We spoke with Christopher Ballas, CEO of Backgrounds Online, who stated, "Any position within a company has the capacity to be a potential liability, from CEO to an entry level job. Why not allow employers, who in the end will bear the burden of the actions of their employees, to make sound and informed decisions? A pre-employment credit report is a valuable piece of information to employers that are looking to place the best candidate in the appropriate position."
Status, voting and the bill's history can be viewed here.
Labels: california senate, credit reports, employment background checks, employment screening
posted by JenWiehl at 12:37 PM
12 Comments:
Yes, give us more legislation that assumes employers are too stupid to make effective, informed decisions in hiring. While they're at it, why not toss out job history disclosure in case people who change jobs frequently are discriminated against?
Leave it to the Democrats!
I don't see anything wrong with running an employment credit check on potential hires. In fact, I think it's smart because people get themselves in financial trouble, mainly during these tough economic times and an employer might wanna know that.
It's a bit scary knowing that a politician can change just about anything they want.
Credit reports walk the line between intrusive and informative. I can see reason for it when it comes to positions that handle money, but just because someone cant pay their bills doesnt mean they arent a capable employee. I suppose I agree with the CEO though, in the long run they'll be the one taking the hit if they hire someone shady.
People are quick to let a property management company run their credit, but not an employer.... I think I'd rather have a reputable business that I want to work for looking at my credit before I have my shady crackhead landlady see it. I see no reason for this legislation. Way to go, Cali! You're paying your state workers $6.55 an hour because you're too busy with crap like this!
I think it is a good idea to be able to run credit reports. I do not have good credit, but it has not stopped me from getting a job, because I am responsible in most areas of my life, but when I was younger, I ran up a big of debt. If an employer would see this, I am not sure how it would affect their decision. But I think each company should decide whether or not that is necessary.
Here's an idea: why don't we just let the government make all our hiring decisions. While we're at it, maybe they can reimburse employers for all theft, lawsuits, and potential damage to their business' reputation that result in placing the wrong person in the wrong position.
Or maybe (just maybe) we can let employers make their own decisions and let irresponsible people suffer consequences for their actions.
If the report doesn't mess with a person's credit and doesn't send a score, what's the problem. People don't want their employer to know they are irresponsible with their personal finances, because they will probably do the same with the companies $.
If fault ultimately will fall on the employer, what is the big deal? Employment credit reports are just an overview of and individual’s finances. If I was a business owner and my employees had access to credit card information and cash, I would want a credit check. If there is a simple explanation as to why someone’s credit is messed up like divorce or unemployment, just say so. Life happens and at this point in time the pool filled with people who have financial problems is over flowing.
Employers need to know their employees---When something goes wrong, the employer is usually the liable party.
An job applicant can explain the reasons for some unfortunate items on their report. Stop the excess involvement by government.
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I talked to a financial services employer once, who saw a good candidate's credit report and was disappointed. He had decided not hire him based on outstanding debt load, payment history etc.
I encouraged him to talk to the guy about it. Turns out the candidate's wife had died of cancer some 2-3 years prior and medical expenses had nearly bankrupted them.
I wonder how many employers look at a lousy credit report and make "effective" and "informed" decisions about honesty and integrity that are actually unsubstantiated.
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