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Business groups still want credit checks for potential hires

ANNAPOLIS — A proposal to ban the use of credit checks in evaluating most potential employees has once again drawn opposition from business interests concerned with losing a tool they say is critical to finding reliable workers.

Supporters argue many of Maryland’s 220,000 unemployed are unfairly handicapped by their recession-battered finances and the lower credit scores that come as a result of late credit card payments, foreclosures and bankruptcies.

“During this period, with so much unemployment, we find that credit reports should be used to check people’s ability to pay, not to work,” Sen. Catherine E. Pugh said during a Senate Finance Committee hearing Thursday.

Pugh, a Baltimore Democrat, is the lead sponsor of SB 132. A similar bill failed last year after supporters and opponents failed to reach a compromise in the waning days of the legislative session.

Del. Dereck E. Davis, D-Prince George’s and chairman of the House Economic Matters Committee, said the legislation has “a very good shot at getting through the House, but it still needs some work.”

Finance Committee Chairman Thomas M. “Mac” Middleton of Charles County, said he would pull a group to work on the bill.

The biggest sticking point for the legislation, which has also been submitted as HB 87, is the exception allowing some businesses to pull credit reports on employees or job candidates. Under the bill, financial institutions, money managers regulated by the Securities and Exchange Commission and companies that can show a “bona fide” job-related reason would be able to use credit reports.

Business groups said the “bona fide” catch-all provision is not clear enough, and that some uses they see for credit reports could be excluded.

“It needs to address [employees] with access to cash, to personal information, to valuables,” said Allyson Black, a Maryland Chamber of Commerce lobbyist.

Ellen Valentino, state director of the National Federation of Independent Business, said it can be more difficult for small businesses to overcome employee fraud than large ones.

“The bill doesn’t take into account small business owners who deal with thousands of dollars in cash, and [customers’] credit information,” she said. “There needs to be some tool in the tool box for a small business owner to use a credit check when they feel they need to use it.”

A majority of U.S. businesses use credit checks in hiring, according to a Society for Human Resource Management survey. Some 47 percent use checks some of the time, while another 13 percent use them all of the time.

Most businesses use the credit reports along with checks of criminal backgrounds, court records, references and other resources, said Pat Donoho, president of the Maryland Retailers Association.

“It isn’t that they look at the score and you have to be above 500. They look for patterns,” he said. “If you go through a catastrophic event, a divorce, that’s not going to prejudice you in most employment situations.”

Del. Kirill Reznik, who sponsored the House version of the bill, said most business owners use credit checks out of “a gut feeling to protect their business.”

“The vast majority of employers are using them out of the fear that people with bad credit have a higher propensity to steal from them. And that’s just unfounded,” said Reznik, D-Montgomery.

Caucuses of female and black legislators have backed the bills, arguing that the credit reports are unreliable and unfairly discriminate against minorities. The attorney general’s consumer protection division, too, has backed the bills because it views credit checks as an unreliable predictor of employee performance.

“I bet Bernie Madoff paid all of his bills. That’s not a very good indication of somebody’s character,” said Sen. Anthony Muse, D-Prince George’s. “It’s demeaning. It’s embarrassing. In my opinion, it has very little to do with the character of the person.”

One comment

  1. If there isn’t any correlation between the job and bad credit then it should not be an issue. If the job requires budgeting or managing someone elses money then I can see the employer doing a credit check. Let’s minimize temptation of mbezzlement or theft to meet new hires personal needs.