On October 20, the Equal Employment Opportunity Commission met to hear testimony on whether employers' use of credit checks as a condition of employment violates federal civil rights laws. Credit checks are increasingly included in standard background checks run on applicants for employment.
Civil rights advocates expressed their concerns that use of credit checks in the hiring process has a disparate impact against women and minorities who statistically have lower credit scores in comparison to white males. Business representatives testified that credit checks are generally limited to employees who handle finances, and that the Fair Credit Reporting Act provides applicants with substantial protections and rights against abuse of credit information.
Both business and employee advocates agreed that credit checks should not be used as a blunt screening tool for applicants. While the EEOC has not taken any action to investigate specific employers' use of credit checks in hiring, employers should exercise caution with their use of this tool. Credit checks should only be sought in situations where there is a demonstrable link between specific job duties and risks presented by an employee in financial distress. This usually involves employees entrusted with handling company or customer funds.
Employment decisions should not be based on credit scores alone. Employers that conduct background checks should use them only as one factor in making individual employment decisions. Indiscriminate use of credit checks in hiring opens the employer to possible claims of disparate impact discrimination by rejected minority or women applicants.