Credit checks during hiring quashed by the NY City Council

By: on 2015-07-17
Ask Phil Bradford

Many employers would be barred from checking job-seeker's credit history due to a law enacted by the City Council in the recent past. Councilman Brad Lander (D-Brooklyn) has formulated the bill to make such an act illegal, discriminatory practice.

Laying of the groundwork for the bill

Pro-consumer advocates opined that employer credit checks hit people hard, especially borrowers who are behind on student loan payments, women and minorities. Project director at Staten Island Legal Service (a member of the NYC Coalition to Stop Credit Checks in Employment), Nancy Goldhill said that there are no evidences to support that credit checks would factor in an applicant's ability to succeed in the workplace. She further added that credit reports are notorious for being misleading, as they are often found to be wrought with multiple errors.

The pro-advocates

Instead of denying a job, bill supporters say that employees with bad credit require a job to repay their loans and in turn, improve their creditworthiness. Unfortunately, employers who run a check of their employees' credit scores further aggravate the misery these poor souls have to undergo, Ms Goldhill said. According to her, this keeps the cycle of poverty rolling. Supporting her sentiments is Councilwoman Debi Rose, a cosponsor of the bill, who said that credit checks prevent people from getting employed.

In a statement issued by Ms. Rose (D-North Shore) said, "It is time to remove artificial barriers that exclude countless numbers of New Yorkers from becoming gainfully employed .To her, the time has come to open the doors to those who seek employment and not close on their face.

What the bill stands for

From 2012 survey, it was found that almost 34 percent of all participating employers were reported to have conducted credit checks on selected job applicants. On the other hand, around 13 percent of the survey respondents said that they do check credits of all their prospective employees.

Interestingly, the Council has included some exemptions into the newly enacted law like employers needing to check credit history before hiring, as necessitated either the state or the federal law.

Employers would also have the permission to check credits of applicants looking to join the police department and various other city workers who are already subjected to background checks by the Department of Investigation as well as financial disclosures under the Conflicts of Interest Board.

They are also permitted to check credit history of the applicants for jobs that calls for cyber security or fiduciary duties, in addition to those jobs where a candidate would have the autonomy to finalize financial deals valued at $10,000 or more.

Reaction of the City Council

The law passed 47 to 3, with Councilman Steven Matteo (R-Mid-Island) among those against.

The bill was enacted into law with a vote of 47 to 3, where Councilman Steven Matteo (R-Mid-Island) were amongst those who voted against the motion. As per his justifications, whether to run a check of a prospective employee's credit history or not during the hiring process should not be decided by the government, even though the motive of the bill is a bona-fide one.

However, Minority Leader Vincent Ignizio (R-South Shore) said that the law is pro-work before voting in favor of the bill. To extend his support, Ignizio further added shared that lawmakers should encourage business entities to extend a helping hand to the employees who want to prove their skill set and must not be discriminated against on the basis of a potential adverse financial data that could have happened several years ago.

Ishanee Parikh, spokeswoman of de Blasio said that credit discrimination acts as a hurdle for New Yorkers to seek employment and that they pledge to continue the good work of helping more people to join the workforce in cooperation with the City Council.

Why employers do credit checks

One of the main reasons employers conduct background or credit checks is to make sure that what is written in applicants’ resumes is true. Many applicants exaggerate their skills or add little details about themselves that aren’t true to make their resumes look good, so employers run background checks to confirm the information. They just want to make sure that they are going to hire an employee who will be able to deliver the skills he or she provided in his or her resume.

What is covered in the employer background check?

What exactly is covered when an employer does a background check? One of the things employers check is consumer credit reports. When an employer wants to check your credit report, they need to ask for your permission first, which they can attain in the form of a written letter or signed release. You may decide to refuse, but that can put you at risk of losing the job. This is usually done on applicants who are up for a promotion or those who are applying for sensitive positions (such as positions that offer access to databases, SS numbers, payroll accounts, and money).

How does your credit score affect job selection?

If you are wondering how credit scores affect job selection, you should know that by looking at applicants, credit information can help employers decide between two equally talented applicants. If one applicant has tax liens and debt and the other applicant has a good credit history, the employer is more likely to choose the latter because they may feel more confident that the applicant who has no financial setbacks will be able to focus more on his or her work without being distracted by financial problems.

Job seekers used to only encounter employers conducting credit checks if they were applying for a job that involved handling money. However, many employers are now starting to do credit checks more frequently as a way of protecting their companies and safeguarding the information stored in their databases. For positions that involve handing out, money and credit checks are inevitable. There is nothing you can do to avoid getting your credit reports checked because having this done allows an employer to make sure that you are responsible when it comes to handling money and review your reliability when it comes to handling the company’s assets. For other positions that require credit checks, employers use the information in applicants’ credit reports to check for signs of poor decision-making or to assess his or her negligence; basically using the credit report as a character reference.

Are employer credit checks effective?

While some applicants may think that credit checks conducted by employers are unjust, credit checks are effective in protecting companies and their employees. Employers want to make sure that their data is going to be kept safe and confidential, and they want to hire people with integrity and honesty, which are two of the most sought-after traits in employees.

Should you fear employer credit checks?

If you are a job-seeker, there is no need to fear credit checks. If you have negative items on your report, do not refuse when a potential employer asks if they can run a credit check on you. Instead, agree and be prepared to explain the reasons for your negative credit history and assure the employer that you are well on your way to financial recovery and have learned from your mistakes. If you don’t get the job due to the information in your credit report, the employer will inform you of the reason in writing.

Last Updated on: Fri, 17 Jul 2015

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