The U.S. Equal Employment Opportunity Commission (EEOC), labor unions and advocates for the unemployed are among the groups pushing for state laws and federal policies to bar pre-employment credit checks, Time reported on October 11, 2011. California became the seventh state in the nation to ban pre-employment credit checks when Governor Jerry Brown signed Assembly Bill 22 into law on October 10, 2011.
Business, industry trade groups and large credit bureaus argue that credit histories are an important tool for employers to use and the new law set to take effect on January 1, 2012, could make employers less willing to hire. Time noted that a survey by the Society for Human Resource Management found that 60% of employers do credit checks for at least some positions.
There are numerous flaws with pre-employment credit checks, such as reports failing to provide sufficient context and reports often being inaccurate. Furthermore, as Time noted, the use of credit checks falls disproportionately on ethnic groups that happen to have among the highest unemployment rates. That race difference can make the practice a violation of federal civil rights law, and the EEOC has taken the position that the use of credit histories in employment is illegal discrimination.
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