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Poor credit may cost jobs

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Indiana Lawyer Focus

During long periods of unemployment people often fall behind on bills, and evidence of those financial woes can be found in the credit histories of people who are struggling to make ends meet.

While more companies may be hiring again, if they base hiring decisions on an applicant’s personal credit history, employment may be an elusive goal for some people.

The relevance of credit histories

In the past few years, several states have introduced bills to restrict employers’ level of access to personal credit reports. Sen. Greg Taylor, D-Indianapolis, introduced a bill this year that would limit access to credit reports, except for specific occupations. That bill failed to advance beyond committee, and a similar amendment he proposed to House Bill 1001 failed a voice vote, too.

Taylor couldn’t explain why his bill didn’t make more progress in the Legislature.

“I really don’t know except that people in this body are sometimes a little less willing to do anything that hampers the employment process,” he said. “We’re very employer-friendly, if you will.”

Taylor, who is also a lawyer, said he sees no connection between credit and employability.

“Companies are beginning to hire again, but they are becoming more and more selective about who they hire,” he said. “Personally, I believe that if someone’s credit score is bad, it doesn’t have any correlation with their work ethic.”

John Hoover, founding partner of Hoover Hull, said he can understand why someone would look at credit histories when making hiring decisions.

“If you’re running a law office and confidentiality being as important as it is, if you had somebody who was in terrible financial straights, you would be concerned about their attention to detail at work … there would be a variety of things that would cause me concern about hiring someone if they had terrible financial problems,” he said.

greg taylor Taylor

“Race, age, sex and national origin are protected categories. I don’t think people that owe money to other people are a protected category,” Hoover said.

Drewry Simmons Vornehm attorney J.D. Walls, who represents employers, said he’s been fielding more questions from businesses recently about background checks.

“The issue has bubbled up more and more often over the last four or five years, particularly since the economy started going down, and what we’ve seen is just more questions about the appropriateness of using it, particularly the credit report part of it,” Walls said.

“Most employers – statistics bear this out – use credit checks on at least some employees,” he said.

The Equal Employment Opportunity Commission has taken a keen interest in this topic in recent years, Walls said. And other advocacy groups are becoming more vocal in calling for a change.

The impact of credit checks

Madeline Neighly, staff attorney for The National Employment Law Project, said the NELP opposes pre-employment credit checks.

“We believe that the use of credit reports in employment decisions has a disparate impact on persons of color and likely violates Title VII,” she said.

Title VII of the Civil Rights Act of 1964 makes it illegal to discriminate against an employee on the basis of race, color, sex, religion or national origin. But the EEOC stipulates that Title VII also prohibits employers from using neutral tests or selection procedures that disproportionately exclude people based on race, color, religion, sex, or national origin, where those tests or procedures are not “job-related and consistent with business necessity.”

Neighly said that NELP has been working with other groups on Credit Catch 22, a project that is calling on the credit reporting agency TransUnion to stop selling credit reports to businesses.

“There’s no data showing that your credit rating, your credit score, or your credit report is going to have any indication of what kind of employee you’re going to be,” Neighly said.

Taylor stopped short of calling credit checks discriminatory, but he sees them as potentially problematic for minorities.

“I think effectively what happens is you’ll find that mostly people who are poor who need jobs the most are the ones who are going to be affected negatively,” Taylor said. “As a byproduct, you’ll find that people in the minority community are going to be affected.”

In January 2012, the unemployment rate for white Americans was 7.4 percent, compared to 13.6 for black Americans.

Violations of the FCRA

Companies should be aware of the many laws – state law, common law, federal bankruptcy laws and the Fair Credit Reporting Act – that govern how credit histories may be used, Walls said.

According to the FCRA, an employer must ask for your permission before requesting a report about you from a credit reporting agency or any other company that provides background information. And if something does come up in your credit history that would cause an “adverse action” – like denial of or dismissal from employment, the employer must notify you in writing about what that information is and who provided it. But that’s not always what happens.

In Adrian Singleton, et al. v. Domino’s Pizza, No. DKC 11-1823, the U.S. District Court for the District of Maryland in January denied the pizza chain’s motion to dismiss an amended class-action complaint. In the case, two delivery drivers argued that Domino’s fired them due to their credit histories, without explaining why.

Walls said that in general, companies that provide credit histories for employers are aware of the requirements under FCRA, but they do have limitations.

“You have to be able to articulate a clear rationale as to why you’re using that report,” he said. “That’s the part that service providers aren’t going to be able to help you with.”

The good news, Walls said, is that most employers only look into credit history once they’ve finalized a list of ideal candidates for a job, so if they’re looking at your credit, you’re probably on the short list for the job.•
 

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  • credit slavery
    Sometimes a high credit rating just shows that somebody loves to buy on credit.

    The information on credit reports is really detailed. I think people have a legitimate privacy interest in the information. Why should every employer have access to all this information especially about where all the employees spend their money? Store cards tell a lot. At a minimum there should be specific written consent for employers to run a credit check. Come to think of it, why shouldn't all commercial entities have to get permission to run a check? Why should banks be able to just pull it whenever they feel like sending an offer? Thats even more intrusive and non-voluntary than employer checks.

    The whole credit-debt usury system in this country is a fiasco, it's broke, it doesn't work for regular people to accumulate wealth, it encourages spendthrift, it punishes thrift, it shackes those ill able to afford to dig out of youthful mistakes overusing credit with bonds of interest. The whole mess is brought on us by too much capitalist and liberterian claptrap which has been sponsored in academia by big banks.

    After seeing what the banks did during the TARP I swore off ever donating or volunteering or voting for a republican again. Unfortunately the banks have bought off the dems, too.

    There will be a niche in this country for any politician who is ready willing and able to take on banks. Its half the reason why Ron Paul polls so well contrary to expectations.
  • Questions
    Anonymous:

    Why don't you ask multi-millionaire personal finance guru/talk show host Dave Ramsey what he thinks about credit scores (as well as his opinion on the use of credit scores for employment purposes)?

    I wonder how many of those Wall Street and corporate fat cats who stole money had HIGH credit scores? Probably all of them, and they still stole other peoples' money.

    When you have $200,000 in medical bills for an unforeseen medical problem, are stuck in a $9.50/hour job, get your hours cut to 32 hours per week, and cannot find any other employment no matter how hard you try (and your wages still get garnished), what are you supposed to do?
  • Credit History is Imporant
    I respectfully disagree with those who are of the mindset that one's credit score has no bearing on any legitimate employment concerns.

    I understand that there are always exceptions to the rule, where someone could be hard-working, responsible, and conscientious when it came to paying all of their bills on time and spending within their means and saving what they could, and then something just absolutely financially catastrophic that could in no way be anticipated or planned for happens. But, realistically, how many people with low credit scores can honestly say that their situation couldn't have been avoided through reasonable measures?

    Credit scores reflect a number of things, including maturity, responsibility, attention to detail, foresight, ability to properly prioritize and make rational decisions, whether someone has a baseless sense of self-entitlement, likelihood of honoring promises and commitments and deadlines, likelihood of promptly rectifying mistakes vs. just giving up and letting the cards fall where they may, likelihood of bringing unnecessary drama into the workplace (whether it be merely lamenting one's financial troubles to coworker-friends, to using paid work time to handle personal affairs with creditors, to having to have the payroll department spend unnecessary time processing garnishment requests/demands), and likelihood of stealing products/time/money from the company out of desperation.

    By the way, this is coming from someone who is not wealthy by any stretch of the imagination.
  • Unfair credit-based hiring practices
    I'm sure this comment will be deleted. The reason Senator Taylor's amendment to HB 1001 failed the voice vote is because the majority of the Senate members are wealthy off the government's policies and have a vested interest in ensuring as many people are unemployable as possible. Heaven forbid you lose your job and can't pay medical bills, then you are denied employment due to having a poor credit score. How in the h--- are you supposed to ever pay what you owe if you can't get employment. In Indiana, you can even be jailed in some cases if you fail to pay a civil judgment (resulting in more kickbacks to state and local politicians from the correctional-industrial complex). It seems like our General Assembly WANTS people to stay in poverty.

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  1. CCHP's real accomplishment is the 2015 law signed by Gov Pence that basically outlaws any annexation that is forced where a 65% majority of landowners in the affected area disagree. Regardless of whether HP wins or loses, the citizens of Indiana will not have another fiasco like this. The law Gov Pence signed is a direct result of this malgovernance.

  2. I gave tempparry guardship to a friend of my granddaughter in 2012. I went to prison. I had custody. My daughter went to prison to. We are out. My daughter gave me custody but can get her back. She was not order to give me custody . but now we want granddaughter back from friend. She's 14 now. What rights do we have

  3. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

  4. I have a case presently pending cert review before the SCOTUS that reveals just how Indiana regulates the bar. I have been denied licensure for life for holding the wrong views and questioning the grand inquisitors as to their duties as to state and federal constitutional due process. True story: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS Shorter, Amici brief serving to frame issue as misuse of govt licensure: https://www.scribd.com/doc/312841269/Thomas-More-Society-Amicus-Brown-v-Ind-Bd-of-Law-Examiners

  5. Here's an idea...how about we MORE heavily regulate the law schools to reduce the surplus of graduates, driving starting salaries up for those new grads, so that we can all pay our insane amount of student loans off in a reasonable amount of time and then be able to afford to do pro bono & low-fee work? I've got friends in other industries, radiology for example, and their schools accept a very limited number of students so there will never be a glut of new grads and everyone's pay stays high. For example, my radiologist friend's school accepted just six new students per year.

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