Employment-Related Credit Checks Could Be Banned​

January 06, 2020
A proposed bill intends to disallow employers from running credit reports for most hiring scenarios.
Backgrounds Online | January 06, 2020

A proposed bill intends to disallow employers from running credit reports for most hiring scenarios.

About The Legislation

U.S. Congress House Bill 3614 (HB3614) is a proposed law that calls for an update to the Fair Credit Reporting Act (FCRA). It is known as the “Restricting Credit Checks for Employment Decisions Act.” If passed, it will prohibit employers from running credit checks with a few exceptions. Authors of this bill believe there is generally no correlation between a person’s creditworthiness and job performance.

The Act would update existing law that states: “A person may use a consumer report with respect to any consumer in which any information contained in the report bears on the consumer’s creditworthiness, credit standing, or credit capacity.” HR3614 revises this to stipulate employers may only run credit reports on applicants if:
· One is required by a federal, state or local law.
· The information contained in the report is being used for a national security investigation.

This bill also clarifies that costs involved in procuring a credit report may not be passed on to the consumer. Furthermore, it says that information contained in a report may not be shared with any individual unless doing so is required to "comply with any applicable federal, state, or local equal employment opportunity law or regulation."

Read the bill.​

Are Credit Checks Detrimental?

Representative Maxine Waters supports HR3614. She believes the use of credit checks can cause qualified people to be denied employment because of a financial hardship they endured. Waters commented: "People who have been unemployed for an extended period of time, and whose credit standing has been damaged because they were unable to pay their bills, cannot secure a new job to end their financial distress because prospective employers conduct credit checks as part of an application process."

Members of the House Committee also suggested credit checks are unfair to ethnicities that are said to commonly have lower credit scores. Waters provided input on this by commenting: "The growing use of credit checks may disproportionately screen otherwise qualified racial and ethnic minorities out of jobs, leading to discriminatory hiring practices."

Opposition To The Bill

Groups such as the Society for Human Resource Management (SHRM) and the Professional Background Screening Association (PBSA – formerly the NAPBS) are opposed to HR3614 because they feel it is too broad. Both the President/CEO of SHRM and the Executive Director of the PBSA gave statements which suggested credit history policies should be designed to meet the needs of individual organizations that are hiring for financial positions.

Neil Bradley, Executive Vice President and Chief Policy Officer for the U.S. Chamber of Commerce also chimed in on this subject. He said: “This legislation would make it more difficult for employers to review the backgrounds of prospective employees, which would make it more difficult to hire for sensitive positions or would otherwise delay the hiring process.”

Most employers do not use credit checks. They are typically only run for positions such as Financial Advisors, Sales Executives and people who would have access to company or partner funds. Before running a credit check, an employer must be vetted to determine that they are qualified and have a permissible purpose.

What Employers Should Know

Currently, several states have restrictions on the use of credit reports for employment. If HR3614 is signed into law, employers should be aware that nationwide restrictions will go into effect. Backgrounds Online will keep up with the status of this bill and provide updates as they occur.

You may not need to check an applicant’s credit history, but when bringing on employees, contractors or volunteers it is essential to run comprehensive background checks. The team at Backgrounds Online can help you build custom screening packages for any position. Contact us for expert assistance Monday through Friday from 5am to 6pm PT.