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Use of Credit History in the Hiring Process

By Thomas McKinney

The hiring process can be intense on both sides. Potential employees are anxious to present their best selves to potential employers. Employers want a vetting process that helps ensure they are selecting the right person for the job. As employers work towards instituting a hiring process that encourages the selection of a person who is dependable and well suited for a position, many different screenings of a potential employee may occur. Did you know, for instance, that some employers will check an applicant’s credit as part of the hiring process?

Use of Credit History in the Hiring Process

There are a number of reasons why an employer would want to run a credit check on a potential employee. Several potential problems could be flagged in doing so. For instance, a backlog of late payments could demonstrate that a potential employee lacks organization and fiscal responsibility skills. Lack of available credit or excessive debt could show that the potential hire is, in fact, in financial distress. A person in financial distress may be more likely to defraud or steal from an employer or someone else. Furthermore, a credit history that suggests an individual mishandles their own finances could be a big red flag for a company hiring for a position requiring money management or responsible management of consumer information. That is why credit checks are more common when a company is hiring for a position requiring a person to have security clearance and access to money and sensitive information.

Job seekers in New Jersey should be aware, however, that there are both state and federal employment laws in place to protect them from how employers can conduct background checks on job applicants. There are also protections in place that limit how employers can use the information obtained via a background check, whether it be a credit check or criminal history check.

The Fair Credit Reporting Act (FCRA) is the federal law regulating consumer reporting agencies. Credit reporting agencies are those companies that compile consumer information and will distribute that information for a fee. The FCRA places restrictions on when information, such as a credit report from a credit-reporting agency, can be used. There are only a limited number of situations where a person’s credit report can be used and employment is one of them.

At the state level, New Jersey law is largely a reflection of the FCRA and the language employed by the federal law. Both the FCRA and the New Jersey law require a job applicant’s written consent in order to obtain their credit report. New Jersey law also requires that employers provide job applicants with a written disclosure stating that a credit report will commonly reflect information speaking to an applicant’s character and general reputation, among other things. The FCRA does not require this written disclosure.

An employer is also required to provide a job applicant with a copy of the credit report pulled upon request. Should the employer decide to take an adverse employment action, such as not hiring or promoting a person, based on their credit report, the employer is required to provide the applicant with a copy of the report. Additionally, the employer is required to provide written disclosure of the applicant’s rights under both state law and the FCRA.

New Jersey Employment Law Attorneys

Do you have questions about the use of credit history in the hiring process? Do not hesitate to reach out to the dedicated team of employment law attorneys at Castronovo & McKinney. Contact us today.

About the Author
Tom McKinney is an experienced NJ Employment Lawyer in all major areas of labor and employment law, including discrimination, harassment, overtime violations, wage and hour claims, sexual harassment, wrongful discharge, Title VII, ADA, ADEA, FMLA, LAD, FLSA, and all other employment law claims. Tom is admitted to practice in the States of New Jersey and New York, United States District Court for the Eastern District of New York, Southern District of New York, District of New Jersey, and United States Court of Appeals for the Third Circuit. Prior to forming the firm, Tom practiced at Gibbons P.C. in Newark, NJ. If you have any questions regarding this article, contact Tom here today.