Prevent new type of lawsuit: Credit-Check discrimination — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

If your organization uses credit checks in the hiring process, you’d better have a sound business reason for doing so or you could face a new type of litigation: Minorities who’ve been turned down for jobs because of their credit history are arguing that employers are using credit checks as a way of illegally discriminating against minority applicants.

The numbers back up their claims. According to a Texas Department of Insurance study in 2004, credit scores of African-Americans generally run 10 to 35 percent lower than those of white Americans. Hispanics’ scores run 5 to 25 percent lower than whites.

Credit checks are becoming increasingly popular. While a 1996 Society for Human Resource Management survey found that only 19 percent of employers pull credit reports as part of the screening process, that number rose to 35 percent by 2003.

Understanding ‘disparate impact’

Title VII of the Civil Rights Act of 1964 proh...(register to read more)

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