Employers should approach credit reports
with caution when using them as part of a background check
, because controversy has been swirling around the practice.
Under the Fair Credit Reporting Act, a credit report should only be obtained after the applicant has given consent. If an employer chooses not to hire an applicant, the job hopeful is entitled to a copy of his or her credit report, a pre-adverse action notice and a statement of their rights. Before any decision is final, applicants have the right to challenge the credit report, writes Employment Screening
A credit report can be an excellent resource in an employment decision, particularly for jobs that require employees to work closely with the financial information of consumers. However, it cannot be the sole reason to refuse a job applicant. ESR advises that companies clearly articulate why a credit report is related to a job position.
Some employment law attorneys are cautioning against using credit history as part of employment screening because the practice can sometimes be interpreted as discriminatory.
On December 21, 2010, the Equal Employment Opportunity Commission filed a nationwide hiring discrimination lawsuit against Kaplan Higher Education Corporation. The organization argues that Kaplan has rejected job applicants based on their credit history, which is unlawful and discriminatory because of race and is "neither job-related nor justified by business necessity," says the EEOC.