Credit Industry pushing back hard on regulation of credit checks for hiring...

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Sat Apr-10-10 08:23 AM
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Credit Industry pushing back hard on regulation of credit checks for hiring...

http://www.nytimes.com/2010/04/10/business/10credit.html?pagewanted=all

April 9, 2010

As a Hiring Filter, Credit Checks Draw Questions
By ANDREW MARTIN

...........Screening the backgrounds of employees “is critical to protect the safety of Connecticut residents in their homes and offices, in their cars and in all other places they travel,” Mr. Rosenberg testified to Connecticut legislators in February 2009, explaining why TransUnion markets its credit reports to employers.

Trouble is, researchers say there is no evidence showing that people with weak credit are more likely to be bad employees or to steal from their bosses, a fact that Mr. Rosenberg himself later admitted.

“At this point we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud,” he said in separate testimony to Oregon legislators in January.

With millions of Americans nursing damaged credit reports after a bruising recession, some lawmakers are seeking to limit the use of credit reports as a factor in hiring.

Legislators in more than a dozen states have introduced bills to curb the use of credit checks during the hiring process, and three states have passed such laws.

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Supporters of such laws say they are necessary because an increasing number of employers are doing credit checks even though there is no proof that bad credit is a marker of risky employees.

Furthermore, they say the practice unfairly tars the huge pool of people whose credit was damaged by layoffs, medical bills or other factors beyond their control. They also say it disproportionately screens out minorities.

“Bernie Madoff had a pretty good credit score,” said Matthew Lesser, a Connecticut state representative who introduced a bill early last year that would have limited employers’ use of credit reports.

“And yet there is this consistent message that if you have a bad credit score, there is something wrong with you.”

Jerry K. Palmer, a psychology professor at Eastern Kentucky University, said his studies, though relatively small, found no correlation between the quality of an employee’s credit report and that worker’s job performance or likelihood to quit.

He said he was not aware of any studies that showed a correlation between poor credit and employee fraud or violence. But he noted that more research was needed to show what credit reports could predict.

Even so, the industry that sells credit checks has remained firm, mounting a counterattack against legislation with some success.

Bills introduced in California, Maryland and Connecticut, for example, have been stalled amid opposition from credit bureaus and other businesses. ...................