Bad Credit ≠ Bad Worker

If you listen to politicians talk about America’s 14.5 million-person unemployment problem there’s usually a lot said about the seemingly double-jointed powers of tax cuts or government spending.

What you don’t often hear are the words “pre-employment credit screening.”

But, a report released in December by the New York-based nonpartisan research and advocacy organization Demos indicates that credit checks should truly be the topic of many more conversations.

Millions of unemployed Americans may be getting caught in a very serious feedback loop. They can’t find work because of their credit score. But, they can't improve their credit score because they can’t find work.

Tell Congress that its time to help Americans in the deepest financial trouble find the jobs they need.

It seems employers looking to hire everything from shelf stockers to bank tellers, CEOs to child care workers are running credit checks on job applicants.

The theory behind the checks is simple: an employee with a poor credit history – particularly pending debt collection suits -- is under the kind of pressure that makes them prone to participating in fraud, theft, bribery and other ethical lapses on the job.

There is just one problem: there isn’t any evidence to support that idea. In fact, there’s ample evidence that just the opposite is true. It turns out that when employees are deep in debt, they tend to buckle down and work harder according to the Demos report.

Still, the in-debt worker is a dangerous worker myth persists.

In fact, a 2009 Society of Human Resources Management study found that while just one in five employers screened applicant’s credit histories in 1996, less than 15 years later the practice has become widespread. In 2009, six out of 10 employers engaged in pre-employment credit screening.

The situation has grown so intense that in October the U.S. Equal Employment Opportunity Commission (EEOC) held public hearings on the practice. And in December, the EEOC filed suit against Kaplan Higher Education Corporation. The suit alleges that Kaplan’s widespread pre-employment credit screening policy violates the Civil Rights Act of 1964. The for-profit college company's credit screenings were not job related (i.e. the applicants would have no financial responsibilities if hired). And, the policy disproportionately prevented minority and female candidates from being hired, according to the suit. For its part, Kaplan says the screenings were fair because they were a part of the hiring process for every applicant.

If reigning in pre-employment credit screening seems logical, think again.

Several states have passed laws to limit pre-employment credit screening. But, the federal story is quite different.

In September the House Subcommittee on Financial Institutions and Consumer Credit held a three-hour hearing on pre-employment credit screening and a bill that would limit its use. The bill, known as the Equal Employment for All Act, was opposed by human resources trade groups and business interests. It wassupported by employee, civil rights and civil liberties groups.

So where does The Equal Employment for All Act stand? It stalled and then died. That's why it needs to be reintroduced right now.

Tell Congress that its time to help Americans in the deepest financial trouble find the jobs they need.

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