February 11, 2011

Credit checks for employment are embarrassing and unnecessary, advocates say

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By Megan Poinski
Megan@MarylandReporter.com

Credit reports could no longer factor in hiring decisions, if a bill proposed by Sen. Catherine Pugh becomes law.

The bill would prohibit employers from using credit checks to make hiring decisions, unless the employee would be working for a financial institution or an investment house. The bill also exempts jobs that require credit checks by federal or state law.

Senator Catherine Pugh

Pugh, a Baltimore City Democrat, testified on her bill at a Senate Finance Committee hearing Thursday. The House version of the same bill had a hearing Tuesday.

With many people struggling with unemployment, unpaid mortgages and medical bills, Pugh said that they have worse credit scores than they would otherwise. It is unfair, she said, for that to weigh into a hiring decision.

“Credit reports should be checked to see a person’s ability to pay, not their ability to hold a job,” Pugh said.

The bill, which carries endorsements from the Women’s Caucus and the Black Caucus, was supported by a parade of witnesses. But some business and industry representatives staunchly opposed it.

Proponents

Melissa Broome, a senior policy advocate for the Job Opportunities Task Force, said that there are 46 state organizations on board to support the legislation. Studies have shown that there is no correlation between someone’s credit report and his or her ability to do a job well or commit fraud, Broome said, but 60% of employers now conduct credit checks on job applicants. These screenings disproportionately impact low income people and minorities, she said.

Robin McKinney, director of the Maryland CASH Campaign, said that credit checks are not always reliable. McKinney’s organization teaches people financial responsibility, and she also teaches a class at the University of Maryland. Each semester, students from her class pull their own credit reports, and everyone finds at least one error.

Louis Brown, the director of social concerns from the Maryland Catholic Conference, said that the inference is completely unfair.

“Generally, I think it’s offensive to say because you lost your job, you’re more likely to steal,” Brown said. Several other witnesses said that running a criminal background check is a better way to find out if someone might be a thief.

Peter Sabonis, assistant director of advocacy for income security at Legal Aid, named specific people who did not get jobs because of poor credit. Their credit problems stemmed from major medical bills, unemployment or repossessions. The fact that low credit scores kept them from being hired is ironic, he said.

“The greatest burden the poor bear is being judged,” Sabonis said. “Why they are being judged at the doorway of their only place of economic redemption is beyond me.”

Opponents

However, wtinesses  representing employers forcefully opposed the legislation. Maryland Chamber of Commerce Vice President for Government Affairs Allyson Black said that the bill does not take into account legitimate reasons for wanting a credit check of employees, such as if they handle money or will be entering peoples’ homes.

Colleen Denston, government affairs director for the Maryland Society for Human Resource Management, said that items like medical bills or falling behind on a mortgage because of unemployment are not considered when an employer pulls a credit report. And they are not used all of the time – just when it is relevant, such as when someone is up for an executive management position. Nowadays, some peoples’ former employers are unwilling to say anything negative for fear of defamation lawsuits, Denston said.

“It drives them to obtain other legal information,” she said, indicating that a credit report can provide some of that critical background.

Senators on the committee were unconvinced. Many echoed what the proponents said, calling credit checks for employment embarrassing and intrusive.

“I bet Bernie Madoff paid all his bills,” said Sen. Anthony Muse, D-Prince George’s County.

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  • I agree with the advocates. Background check — ok. But credit check? Totally unnecessary. It’s not like the employer will be loaning the employee money…

    http://www.jobvirtue.com

  • Mo

    I agree. Background checks are ok. Credit Checks are unnecessary and rarely have any bearing on a person’s job only and slightly maybe in the Financial Business. It sounds like much sooner than later this bill will be passed and most companies will be banned from doing this totally invasive practice. Make this law permanent that no company can ever do this practice again!!!

  • Junker1

    If passed, this will be a strong motivator for businesses not to locate themselves in Maryland, and will motivate some businesses to move out of Maryland. I’ve been on both sides of this fence, as employee and as employer, and it is a two-way street. An employer brings something to the table, and so does the employee. As an employer, I am entrusting the reputation of my company with this prospective employee, and there can be things in credit reports that I want to know about and discuss with the prospective employee before I make a hiring decision. Bankruptcy for example, can occur through bad luck, or through very bad decisions. I want to know about this, one way or another, before I hire someone. Being financially unstable makes people desperate, and I need to be able to know whether I can help this person out of their desperation by giving them a leg up, or whether I don’t want to be part of their future bad decisions. By forcing me not to know about this, you are degrading my ability to create a strong company, and therefore degrading my ability to succeed…and how is that good for the Maryland economy? This is one more example of institutionalizing a lack of accountability…the same thing that makes it so difficult to build a stronger community in Maryland supporting happiness and prosperity in the long term based on real accomplishments.

    • Janet Hill

      Interesting, I would hope that businesses would check their facts better before using that as a factor in deciding where to locate.  There are no studies correlating a bad credit rating and bad employee performance or employee turnover which was admitted in testimony by an employee of Transunion.. And credit reports are riddled with errors.  Many people pulling a credit report for the first time find errors.  And I am willing to bet that Bernie Madoff had a pretty good credit rating…

  • stillhere

    Perhaps there is a middle of the road here.  As an unemployed person with economy driven bad credit what I would find most useful, is if the employer is going to run a background/credit check perhaps they would be so kind as to disclose the criteria that would make a person ineligible for a position in the job description information so that a person does not waste time applying and going to 2 or 3 interviews only to find out that in the end the credit report was at issue.  It is the huge shroud of secrecy that is placed on the whole hiring process that makes it all so daunting. Secondly, perhaps we could come to an agreement that when a person’s credit check is run they look at the information prior to 2008.  Who was that person before the recession, before they lost everything.  The emotional distress is bad enough.  Do we really have to discuss why I have this break in employment, do I really have to recap it for you??? Lastly, it seems the biggest concern is over fear of being stolen from.  Perhaps more focus should be given on how to have more faith in our fellow man.  I mean really, those guys at Enron, what was in their credit check do you think????