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What should we know about running credit checks on job applicants?

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in Employment Background Check,Hiring,Human Resources,Leaders & Managers,Management Training

Q. Our company is hiring a new finance director and we’re planning to do credit checks on serious job candidates. Are there any legal issues that we should be aware of?

A. Make sure you take the steps necessary to comply with the Fair Credit Reporting Act (FCRA) and any applicable state laws.

The FCRA requires employers to take various steps when using an outside agency to obtain background checks. Employers are required to provide notice and obtain the applicant’s consent before obtaining a background report.

Minnesota law requires that notification to include a checkbox for the applicant to request a copy of the report. Once a report is obtained, an employer can take no adverse action based upon information obtained in a report until it goes through various steps aimed at giving the applicant an opportunity to dispute inaccurate information.

Even when authorized under the FCRA, employers should assess whether obtaining a background investigation is justified for the position for which the applicant is applying.

The EEOC recently indicated that it believes it is suspect to use credit checks as an indicator of job performance or a candidate’s propensity to engage in theft or fraud. The EEOC has initiated lawsuits against at least two large employers, challenging the use of credit and criminal background checks in making hiring decisions.

While past court decisions have upheld the use of credit checks in making hiring decisions for jobs entailing managing finances or handling valuables, employers can expect to see more and more challenges to this practice as the use of credit checks increases.

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