The U.S. Equal Employment Opportunity Commission (EEOC) held a public Commission meeting to hear testimony from representatives of various stakeholder groups as well as social scientists and the Federal Trade Commission on the growing use of credit histories as selection criteria in employment.

“High unemployment has forced an increasing number of people to enter or re-enter the job market,” said EEOC Chair Jacqueline A. Berrien.  “As a result, an ever increasing number of job applicants and workers are being exposed to employment screening tools, such as credit checks, that could unfairly exclude them from job opportunities.  Today’s discussion provided important input into our agency’s work to ensure that the workplace is made free of all barriers to equal opportunity.”

The Commission heard from a diverse set of experts. Chi Chi Wu of the National Consumer Law Center (NCLC) expressed grave concerns that the use of credit histories is mushrooming at the time of economic instability for many Americans, noting that the use of credit histories “create[s] a fundamental ‘Catch-22’ for job applicants,” especially during this period of high unemployment and high foreclosures, both of which have a negative impact on credit.”  She observed, “You can’t re-establish your credit if you can’t get a job, and you can’t get a job if you’ve got bad credit.”  This view was echoed by several of the witnesses.

Sarah Crawford of the Lawyers’ Committee for Civil Rights Under Law and Dr. Avis Jones-DeWeever from the National Council of Negro Women, explained that the use of credit histories in the employment context can have a disparate impact on a range of protected groups, including people of color, women, and people with disabilities.  While the use of credit checks as employment screens increases, Crawford cited studies that show credit history is a poor predictor of job performance.  Additionally, she pointed out that many credit reports are riddled with errors or incomplete information, a view that was echoed by Wu of the NCLC, making whatever predictive value they might have even less reliable.

Representatives from the business community—Michael Eastman of the U.S. Chamber of Commerce, Christine V. Walters of the Society of Human Resources Management (SHRM) and Pamela Quigley Devata of the law firm Seyfarth Shaw, LLP—told the Commission that the use of credit histories is permissible by law, limited in scope, and predictive in certain situations of reliability. 

Walters of SHRM said that “13 percent of organizations conduct credit checks on all job candidates … [and] another 47 percent … consider credit history … for select jobs,” but for those employers, “credit histories are but one piece of the puzzle.”  It is the experience of SHRM member companies that very few utilize credit histories for every single job opening.  Devata asserted that the use of credit histories is driven, in part, by the need for background information on potential employees in a current environment when it is difficult to obtain any but the most basic information in job references.

However, Dr. Michael Aamodt, an industrial psychologist, said that although there is considerable research that supports the use of credit scores in making consumer decisions, there is little research exploring the implications of using credit checks in the employment context.  Given the potential for discriminatory exclusion, he concluded that it would be wise to use an applicant’s credit history only within the context of a thorough background check. 

This meeting is one of several throughout the year that will examine barriers to employment and their potential adverse impact on protected groups.  The statements of all the panelists, along with their biographies, can be found on the EEOC’s website at http://www.eeoc.gov/eeoc/meetings/10-20-10/index.cfm.  A complete transcript of the testimony will be posted later.