Can an Employment Credit Check Prevent Embezzlement?

It’s a shocking statistic, but the facts make it clear: many of the biggest financial threats to a business come from within. An in-depth study by an American insurer revealed that among companies that experienced significant losses from theft, approximately 90% originated with employees. Could an employment credit check prevent some of those losses? According to an FBI study, nearly two-thirds of employees would consider stealing from a business if they could do so without risk. These numbers illustrate that a thorough background and credit check procedure may be necessary.

Federal Trade Commission Issues New Guidance on the Fair Credit Reporting Act

In 1990, the FTC issued a commentary on the FCRA (published as an appendix to 16 CFR part 600). Between 1997 and 2001, it issued informal opinion letters in response to selected questions that it received. Changes to the FCRA, primarily in 1996 and 2003, rendered much of the prior commentary obsolete. The new guidance reflects the FTC’s most up-to-date guidance.

Additionally, the FTC has formally withdrawn its prior commentary. In a press release, the FTC notes that the reason for this is that the recent financial reform legislation transferred the FTC’s authority to issue this kind of guidance to the newly created Consumer Financial Protection Bureau.

The FTC says that the new guidance mostly codifies its prior positions, but that it modifies some of its prior interpretations. Therefore,.

Please see below for links to the documents referenced in this update:

The report is available at http://ftc.gov/os/2011/07/110720fcrareport.pdf.
The withdrawn commentary is available at http://www.gpo.gov/fdsys/pkg/CFR-2010-title16-vol1/pdf/CFR-2010-title16-vol1-part600-app-id1020.pdf.
The informal staff opinion letters are available at http://www.ftc.gov/os/statutes/fcra/index.shtm.
The formal withdrawal of the prior commentary is available at http://ftc.gov/os/fedreg/2011/07/110720fcrafrn.pdf.
The FTC’s press release is available at http://ftc.gov/opa/2011/07/fcra.shtm.

For more information on this update may affect your program and how backgroundchecks.com can help, please contact client services.

Federal Reserve Board Issues New Report Studying the Disparate Impact of Credit Histories

The use of credit reports in employment decisions has recently become a controversial issue. It has been put up for debate whether or not making hiring decisions based on credit history could have a disparate impact on racial and ethnic minorities with the end result of hiring fewer minority applicants. A recent report from the Federal Reserve Board calls into question the generally held belief that hiring decisions based in part on credit histories have a disparate impact on racial and ethnic minorities. Rather than analyzing the potential disparate impact in hiring decisions, the October 12, 2010 report analyzed a parallel question: whether the use of credit scores in lending would have a disparate impact on applicants for loans. An important distinction between these two questions is that employment-purpose credit reports do not show a credit score; but they do show the types of information that credit bureaus use in their calculations of credit scores.

Category: Credit Checks