8 states restrict credit checks on new hires

Nov 4, 2013

Q I have always used credit checks when hiring employees, but have heard that many states are now restricting their use. Is this true?

A Yes. Currently, eight states limit employers’ use of credit information in employment: California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Vermont and Washington. Additionally, 34 bills in 17 states and the District of Columbia were introduced in the 2012 legislative session that had restrictions on the use of credit information in employment decisions. For more information about whether your state may be impacted, visit the NCSL at www.ncsl.org/issues-research/banking/use-of-credit-info-in-employ-2012-legis.aspx.

If your state is more restrictive, your state attorney general will be able to provide more detail. Note that when state laws are more restrictive on the publisher than the federal law, it is the state law that must be followed.

Q My state permits me to obtain a credit check on an applicant. Are there federal guidelines that I must follow?

A The federal statute that regulates background checks (credit reports, criminal records, etc.) is the Fair Credit Reporting Act, which is enforced by the Federal Trade Commission. The FCRA requires that you obtain written consent from the applicant to get the report. If you decide you do not want to hire the applicant based on the information collected, you must first warn the applicant of your decision and include a copy of the report that you relied on in making your determination before you reject the applicant. Finally, you are required to give an official notice to the applicant informing him or her of his or her rights to see the information being reported and an opportunity to correct any inaccuracies.

Q Is there anywhere I can turn for specific answers or more information about compliance with the FCRA?

A Yes, the FTC has information about using credit checks and other consumer reports available at business.ftc.gov/documents/bus08-using-consumer-reports-what-employers-need-know. The FTC also has a toll-free helpline available at 1-877-382-4357.

If you have an employment question that ou would like to see covered in this column, please send your submission to: tonda@nna.org or sara@nna.org.