States look to ban employer use of credit reports
To date, 31 bills in 17 states and the District of Columbia have been introduced this year that prohibit or set limitations on the use of employee or prospective-employee credit reports by employers, with three states approving legislation. The proposals are intended to address what legislators perceive as discriminatory hiring practices. The result, however, of such legislation would be to remove a valuable tool from employers to evaluate and compare different candidates under consideration for a job.
The use of credit reports for pre-employment screening is regulated by the federal Fair Credit Reporting Act (FCRA), state credit reporting statutes and a robust body of employment law. Still, misconceptions about the content of credit reports used for employment purposes have encouraged labor advocates to promote restrictions, if not a prohibition, on the practice. Since employers are going to be held responsible for the actions of their employees, employers should have access to tools that give better insight into whom they are hiring. The result of using credit information to make employment decisions is not that fewer employees are hired, but that the best candidates are matched to the available jobs.