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SHRM testifies before House Subcommittee on use of credit background checks in hiring

The use of credit background checks in employment decisions has not increased during the economic downturn, and these checks remain one tool among many that are useful to employers evaluating potential new employees, the Society for Human Resource Management (SHRM) told the U.S. House Financial Services Subcommittee on Financial Institutions and Consumer Credit on September 23. Speaking on behalf of SHRM, Colleen Parker Denston, a senior human resource professional from Maryland, said: “There is a compelling public interest in ensuring that employers can assess the skills, abilities, work habits and integrity of potential hires in an employment process that balances the needs of both employers and employees.”

Denston, director of human resources for Worcester Preparatory School in Berlin, Md., testified on behalf of the 250,000-member Society for Human Resource Management at a hearing on specific legislation to address the use of credit background checks in employment. She detailed SHRM research into employer uses of credit information that reveals only a small minority of organizations conducts credit checks on all job candidates and that organizations generally conduct credit checks only for positions that have responsibilities for managing money, property, personal-identity and financial information, and other critical resources for employees and consumers.

Called the Equal Employment for All Act, H.R. 3149 would amend the Fair Credit Reporting Act (FCRA) to prohibit the use of consumer credit background checks on prospective and current employees for employment purposes. The bill, sponsored by Rep. Steve Cohen, D-Tenn., would make exceptions for managerial positions at financial institutions, job applicants subject to national security clearance, and people applying for government positions that require a credit check.

Denston said there are many more positions across various industries for which the public may have an interest in the integrity of employees. “Credit histories, like other aspects of the background check process, are but one piece of information HR professionals use to evaluate whether an individual should be hired,” Denston told the subcommittee chaired by Rep. Luis V. Gutierrez, D-Ill. But, she noted, “the consideration of credit history information is not only useful in determining whether the potential hire has the skills and responsibility necessary for a particular job, but also whether the individual is qualified to handle money. The consequences of making a poor hiring choice can be great.”

Denston noted that employers already are barred by the FCRA and the Civil Rights Act of 1964 from using credit background checks to screen some job applicants and that the FCRA requires employers to inform applicants if an adverse decision was based on a credit-related issue.

Four states have passed legislation barring the use of credit background checks in hiring in recent years, and another 20 states considered legislation in 2010.

Source: Society for Human Resource Management; www.shrm.org.