If you haven’t heard, Massachusetts Senator Elizabeth Warren has introduced a bill to prohibit the use of credit checks during the recruiting process. This is sure to be an interesting legislative debate and one worth watching. Not just to see if the bill gets passed but to examine the whole conversation about credit checks in the hiring process. It’s possible that any changes in legislation might still allow for other consumer reporting information to be used for employment.
The bill Senator Warren introduced is called the Equal Employment for All Act and would amend the Fair Credit Reporting Act (FCRA). As I was reading about this proposed piece of legislation, I wondered how many people are familiar with the details on the current law. So I asked Pam Stevens, senior director of public relations at Equifax, a global leader in consumer, commercial and workforce information solutions to businesses and consumers, if she would give us a refresh on the FCRA and how it impacts our work lives.
Let’s start at the beginning. Can you give a brief overview of the Fair Credit Reporting Act (FCRA)?
[Pam] The Fair Credit Reporting Act (FCRA), which took effect in 1970, governs who can access your credit report. In Section 604, under Permissible Purposes of Consumer Credit Reports, the FCRA lists the ways your credit report might be accessed:
- Court order or subpoena in conjunction with a Federal grand jury
- Consumer request: you directed in writing that a person may be allowed to see it
- Credit application: you have applied for credit with a creditor or lender
- Preapproved credit offers from creditors and lenders
- Insurance coverage evaluation
- Prospective employers
- Government licensing body or agency
- Potential investor
- Family court, to determine child or family support
- Other legitimate business interests
You’ve listed prospective employers as a way that our credit reports can be accessed. Are employers allowed to check a job candidate’s credit without their permission?
[Pam] No. Job candidates must provide the employer written permission to access their credit report.
What are some common reasons that an employer would ask to run a credit check?
[Pam] Using credit reports for determining employment eligibility is not a new concept. The Society for Human Resource Management (SHRM) notes the top two reasons are to reduce/prevent theft and embezzlement and to reduce legal liability for negligent hiring.
The SHRM data also notes that most organizations initiate credit background checks only after a contingent job offer has been made or after a job interview. Only 2% of employers ask for credit checks prior to a job interview. In these cases, the applicants’ job description most likely involves some sensitivity, such as handling money or valuables, dealing with personal data and similar issues.
If something negative shows up on a candidate’s credit report, does the company have to disclose it?
[Pam] According to the Consumer Financial Protection Bureau, anyone who uses a credit report to deny your application for employment must tell you and also must provide the name, address and phone number of the agency that provided the information.
Because an employer might ask to run a credit check, what should job seekers and employees know about the FCRA?
[Pam] Job seekers and employees should know that, not only do they have a right to know what is in their credit file, they also have the right to dispute incomplete or inaccurate information. The FCRA says that credit reporting agencies must remove or correct inaccuracies within 30 days.
Equifax holds itself to the highest standards when it comes to complying with the FCRA and in regards to the accuracy and security of our data.
If I want to get a copy of my credit report to make sure it’s correct, what do I need to do?
[Pam] Under the Fair and Accurate Credit Transactions Act (FACTA), consumers can access one free credit report every 12 months from each of the three major credit reporting agencies. Candidates can access their Equifax report and learn more about ways to monitor and ensure accuracy of their credit at http://www.equifax.com/CreditReportAssistance/.
Many thanks to Pam for sharing this information with us. Being financially literate is important. This includes staying current with laws that concern our finances and credit. If you’d like to learn more, be sure to check out the Equifax Insights blog.