The Equal Employment For All Act, a Federal Law for Credit Checks, in Discussion

Ever since the economy tanked in 2008, credit checks have held back some from becoming employed again, and have even resulted in state legislations barring them from being a factor in employment. Beyond the state level, however, credit checks in employment have become a national issue. On one hand, the use of them, for example, in non-financial administrative and IT positions seems excessive, while not using them for executive and financially-related positions appears negligent. As we’ve also discussed on this blog before, the use of them may even be considered financial and racial discrimination.

A recent story from Human Resources Executive Online reports on a law regarding credit checks. According to the piece, the House Financial Services Committee held a hearing on September 23 to discuss legislation that would limit the use of credit checks in employment. Primarily, it appears, the law would state how much a background check can investigate and how much of a role credit history can play in hiring decisions. The law, now titled the Equal Employment for All Act, would make using credit checks as a measure in hiring decisions for most occupations illegal. Exceptions would be financial, executive, and government roles.

The use of credit history in background checks has long been a debated issue. While 60 percent of employees do check on a candidate’s credit history, not all use it to make hiring decisions. Nevertheless, a credit check goes beyond financial responsibility and, until the economy crashed, was seen as a measure of integrity. An employee with good credit, for instance, wouldn’t be tempted to steal from the job.

But because of large job losses (the unemployment rate is still 10 percent nationally), foreclosures, and bankruptcy and divorce filings, credit checks don’t indicate why a person’s financial history is poor, and nor do they account for identity theft, a growing crime in recent years.

The Equal Employment for All Act, at least for now, would level the playing field between the employed and the unemployed and, with the exception of a few occupations, would allow those who have experienced financial ruin because of a job loss or foreclosure to find a good job again.