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Poor credit history can cost you a job — and, yes, it is legal

Sometimes what you don’t know can hurt you. Not knowing what’s in your credit history may cost you a job, although the employer will get your consent in writing before running the credit background check. Applicants must be aware of what they are reading and signing.

“Yes, a poor credit score can cost someone a job — particularly if the job being applied for is a money handling position or a position of trust,” says Susan Fahey Desmond, a labor and employment attorney in the Gulfport office of Watkins Ludlam Winter and Stennis. “In large part, it is a legal practice.”

She and human resources professionals interviewed are not aware of a growing trend to do credit checks routinely in Mississippi.

The practice of obtaining an applicant’s credit history has been around for quite some time and if done correctly is legal, she adds. An employer desiring to obtain a credit history of an applicant must comply with the procedures of the Fair Credit Reporting Act (FCRA) which requires the applicant to sign certain documents during the application process and also requires the employer to advise if the applicant is being rejected due to information obtained in the credit report.

“I am aware of various industries using credit checks in the application process, particularly financial institutions,” Desmond says. “I cannot state that I have observed any growing trend outside of the financial institution area. I have noticed more financial institutions being interested in credit checks in recent years.”

That may be because, unfortunately, statistics show that individuals with financial problems are more willing to embezzle funds from their employers. “With the electronic age, embezzlement seems to be too easy a temptation for some individuals when their finances are out of control,” she says.

Rickey Davis, human resources manager for BASF Corporation in Jackson, says the practice of getting credit histories on job applicants depends on the job sensitivity and level of trust.

“It’s according to the job applied for. They’re usually done for jobs in accounting or payroll,” he says. “I haven’t done one in a while. They are not routinely done on all applicants.”

Laura Watkins, human resources director with Farm Bureau Insurance Company, also says she doesn’t do them routinely. “I haven’t run one in several years, but they’re done for someone who handles money,” she says. “A lot of liability comes with that process. The Consumer Protection Act is a very hairy law, and I don’t like to run afoul of that.”

She notes that when the credit history is obtained, HR professionals are not looking at credit ratings. Nor can they use bankruptcy against job applicants.

Desmond says the Fair Credit Reporting Act requires employers to obtain signatures from applicants acknowledging that the employer is checking their background, including their credit history.

“So, assuming the applicant actually reads and understands what he or she is signing during the application process, he or she should be aware their credit history is being checked,” she says. “The only real fallout from the practice is that it sometimes rejects too many applicants, particularly when a large segment of the community is on hard times like right after Hurricane Katrina. But most companies are willing to take such anomalies into consideration in making their employment decisions.”

If a disproportionate number of applicants in a protected class (race, gender, age) are rejected due to poor credit, the employer may be required to justify the practice by business necessity, Desmond says.
“If the position being filled is one that requires money handling, the employer will most likely be able to demonstrate business necessity,” she says. “An employer, however, must be careful if using credit reports because an employer is prohibited from discriminating against applicants because of a bankruptcy, and credit reports inevitably contain this information.”

Contact MBJ contributing writer Lynn Lofton at llofton656@aol.com.

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