States Attempt to Limit Use of Credit Reports

According to a report in USA Today, half of the states in the U.S. are debating bills aimed at limiting when credit reports can be used in the hiring process.

Heather Morton with the National Conference of State Legislatures said economic stress is the main trigger. “Legislators are responding to the impact the recession has had on employment,” said Morton.

In California, the foreclosure crisis has combined with a 12.4% unemployment rate to erode the credit status of millions of state residents, said Tony Mendoza, state Assembly member who is sponsoring California’s bill. Yet, 60% of U.S. employers conduct credit checks on job applicants, according to the Society for Human Resource Management (SHRM).

Elizabeth Bille, associate counsel for SHRM, argues that employers use credit reports very judiciously, primarily late in the hiring process and mostly for sensitive managerial positions. Bille said many proposed bills are overly broad.

Giant credit bureaus Experian and Trans-Union also oppose the bills. Employers want to know whether a job applicant “acted prudently while (previously) employed,” said TransUnion spokeswoman Colleen Tunney-Ryan. “A pre-employment (credit) report is one tool that helps them assess that.” ◆