CUSTOMER RESOURCES
Credit Checks
What You Should Know
From an employer’s perspective, it sometimes makes sense to look at a job applicant’s credit history. The argument is that credit history reflects financial responsibility, which can be useful for making hiring decisions that involve financial functions or duties. While credit history checks are not as standard as criminal history checks in the employee screening process, employers do use them semi-regularly for jobs in finance. From banks to brokerages, many businesses want to know how their candidates handle personal funds before giving them responsibility for other people’s money. What employers might not know is that the rules around running credit history checks for employment are exceptionally complex. In this white paper, we will explore some of these regulations as well as the arguments regarding whether employers should use credit checks at all.
Additional Resources
Legislation and Compliance Update - Colorado Bans the Use of Consumer Credit Information for Employment Purposes
Colorado passed new legislation on April 19, 2013 which restricts an employer’s use of consumer credit information for employment purposes. The legislation is cited as the “Employment Opportunity Act.”
Colorado’s new legislation prohibits an employer from using consumer credit information for employment purposes “Employment purposes” is defined in the Act as “evaluating a person for employment, hiring, promotion, demotion, reassignment, adjustment in compensation level, or retention as an employee.”
Additionally, an employer may not require an employee to consent to a request for a credit report that contains information about the employee’s credit score, credit account balances, payment history, savings or checking account balances, or savings or checking account numbers as a condition of employment. Consumer credit information includes a credit score but does not include the address, name, or date of birth of an employee associated with a social security number.
Exceptions to these restrictions include:
a. The employer is a bank or financial institution;
b. The report is required by law;
c. (1) The report is substantially related to the employee’s current or potential job and (2) the employer has a bona fide purpose for requesting or using information in the credit report that (i) is substantially related to the employee’s current or potential job and (ii) is disclosed in writing to the employee.
A consumer credit report is considered “substantially related to the employee’s current or potential job” if the information is related to the position because:
(a) the position is either
(1) an executive or management position or(2) professional staff to executive or management personnel and
(b) the position involves one or more of the following:
(1) Setting the direction or control of a business, division, unit, or an agency of a business,(2) A fiduciary responsibility to the employer,(3) Access to customers’, employees, or the employer’s personal or financial information other than information customarily provided in a retail transaction, or(4) The authority to issue payments, collect debts, or enter into contracts.
A consumer credit report is also considered “substantially related to the employee’s current or potential job” if the information is related to the position because the position involves contracts with defense, intelligence, national security, or space agencies of the federal government.
If an employer relies on consumer credit information when taking an adverse employment action, it must disclose that and disclose the particular information it relied upon. The disclosure must be made to an employee in writing or to an applicant in the same medium as the application (e.g., electronically for an electronic application).
Civil penalties may be awarded up to $2,500 for injuries as a result of a violation of the Act.
The Act may be accessed here: http://www.leg.state.co.us/clics/clics2013a/csl.nsf/fsbillcont3/5E2C07DC74DD73D687257AEE0057DC52?Open&file=018_enr.pdf
