Bill Would Stop Employers from Using Credit Checks for Hiring and Firing

By Michael Klazema on 4/22/2013

A new piece of legislation was introduced by Congressman Steve Cohen from Tennessee that would stop employers from basing decisions during the hiring process on bankruptcy filings and credit checks. Cohen said that the credit history of an applicant will not accurately predict their job performance, saying that in these hard economic times, economic background checks could make it even harder to find a job. The bill is called the Equal Employment for All Act and would prohibit using a background check with a credit report section as part of the application process except in some cases.

The Society for Human Resource Management says that pre-employment credit background checks done by employers has risen from 36% to 43%, but despite this, the credit score found in a background check has not had any impact on job performance except in cases of jobs which involve significant financial responsibility. In addition, the EEOC (Equal Employment Opportunity Commission) has pointed out multiple times in the past that credit checks will disproportionately impact minorities and women, showing a workplace bias. These economic checks also make it much more difficult to find a job and create a cycle in which Americans cannot pay their debt because they don’t have a job but cannot get a job because of their debt.

The Equal Employment for All Act introduced by Cohen would be an amended version of the Fair Credit Reporting Act in order to stop the usage of consumer credit checks to prevent hiring a potential applicant. The bill does recognize that for certain jobs a credit background check is necessary, so it provides exceptions to allow these checks in the following cases: (1) if the job requires FDIC clearance or national security clearance; (2) if the job is with a local or state government agency that usually requires consumer reports; (3) if the job is at a financial institution and the position is an executive, professional, managerial or supervisory position; (4) any time that the check must be done to adhere with the law.

In addition to the Equal Employment for All Act relating to background checks, Congressman Cohen also introduced another act called the Bankruptcy Nondiscrimination Enhancement Act that is designed to strengthen the nondiscrimination provision of the Bankruptcy Code relating to private employers and any financially-based background check they perform. The Bankruptcy Code currently prevents private employers from firing an employee (or discriminating) only because of a person’s debt or bankruptcy. It also prevents this in cases when the employee was insolvent before starting the bankruptcy or when they have not paid debt that was either discharged during bankruptcy or is dischargeable.

The way the Bankruptcy Code stands, employers can discriminate against and fire employees who have filed for bankruptcy as long as that was not the only basis for the decision. It also currently allows employers to refuse employment based on bankruptcy information that appears in a background check. Cohen’s amendment is designed to make it so that considering bankruptcy that appears in background checks as any part of the firing decision would be prohibited as would be using it as a basis for the decision not to hire someone.

Although the use of a credit check to uncover situations such as a bankruptcy may be against your pre-employment guidelines, there are still plenty of other screening tools you can use to vet potential employees. For example, at, you can gain access to products like the US OneSEARCH , which searches more than 450 million criminal records nationwide. You can also use their Reference Verification tool, which gives you great insight into the character and work ethic of any potential employee.

About - - a founding member of the National Association of Professional Background Screeners (NAPBS®) and cofounder of the Expungement Clearinghouse - serves thousands of customers nationwide, from small businesses to Fortune 100 companies by providing comprehensive screening services. Headquartered in Dallas, Texas, with an Eastern Operations Center in Chapin, S.C., is home to one of the largest online criminal conviction databases in the industry. For more information about backgroundchecks’ offerings, please visit



Tag Cloud
Recent Posts

Latest News

  • March 22 Countrywide, states and local municipalities have committed to ban the box legislation, seeking to equalize opportunities in the job market for those with criminal histories.
  • March 22

    Thinking about becoming a firefighter? Here are some of the background check requirements you might face.

  • March 20

    Four Department of Commerce employees are out after their background checks resulted in security clearance denials. All four had worked high-ranking positions for months despite incomplete background checks.

  • March 15 As more states legalize the recreational use of cannabis, they contend with the emergence of new industries surrounding marijuana cultivation and production. 
  • March 14 In most cases, it is easy to determine where an issue might show up on a pre-employment background check. Citations for traffic violations or reckless driving charges will appear on a motor vehicle record check. Verdicts in a civil court case will show on a civil court background check. And criminal convictions—from petty theft to violent felonies—show up on criminal background checks.
  • March 13 How many years back do employment background checks go? This question can have multiple different answers depending on the situation.
  • March 13 A new bill in Florida would require landlords of apartment complexes to present tenants with verifications of employee background checks to give them peace of mind the people working in and around their homes are trustworthy.
  • March 08 Police officers working with the University of Texas at Arlington recently arrested a man who had avoided police capture on a warrant out of Oregon for nearly two decades. The man, whose real name is Daniel Charles Ray Hanson, spent those 17 years using a variety of fake names and identification documents to move around the country, often engaging with educational institutions under false pretenses. Police say Hanson regularly went by at least three different aliases. He sports a rap sheet that stretches back to an arson conviction in 1995. 
  • March 07

    The Future of EEOC Guidance in Texas Is Up in the Air

    The EEOC issued guidance in 2012 warning employers about the dangers of enforcing categorical policies to bar candidates with criminal histories. That guidance is not enforceable in Texas thanks to a recent court ruling.

  • March 05 Vermont is the latest state to restrict employers’ access to and use of social media accounts of employees and applicants.