As the unemployment rate rises and salaries are cut, people are finding it harder and harder to make all their monthly payments on time. The result has been a renewed focus on the practice of performing credit checks for potential employees during the hiring phase.
The following appeared on HRTechnews.com and provides a good overview of how to use credit checks legally:
- Not getting authorization – The Fair Credit Reporting Act requires companies to get applicants’ consent before obtaining a credit report. Also, applicants must be notified when they’re rejected because of a credit report.
- Ignoring a possible disparate impact – The EEOC has said legitimate screening practices can be discriminatory when they accidentally weed out members of a protected class. That means if, for example, most of applicants rejected by the credit check are minorities, the company might be sued even if the bias was unintentional.
- Using it too much – One way to limit liability of using a credit check to screen job applicants: Only use it when you have to. Most employers just look at credit checks for financial jobs.
Beyond legal issues, some experts say companies should stop taking credit scores into account in the current economy. Bad credit is on the rise, which means many otherwise qualified candidates could be turned down because of situations outside their control.
If you are a company looking to ensure you are legally compliant with your background checks, visit HRSentry and type “Credit Checks” into the search field located toward the bottom of the page in the center column. This will give you an overview of the federal and state-specific resources available.