How to use credit reports in the recruiting process without getting sued

In my last Blog I wrote about the E.E.O.C. ruling that Kaplan Higher Education Corporation discriminated against black job applicants through the way it used credit histories in its hiring process.  I explained that a credit check is only one of many parts of the recruiting process and using a credit check to decide employment is not a black and white issue.  It involves learning what the credit report may consist of and how it may relate to the job at hand.  In this Blog I want to explain that although I use credit checks as a pat of the entire recruiting process, I do so carefully using a number of guidelines.

First of all, a credit check and criminal checks can only be completed after the candidate has given permission.  During the recruiting process that I use with my clients I do this in two ways.  During my first phone interview with a candidate, I will tell the candidate that credit and criminal checks are a part of the process and would they have any issues with it.  I also ask if there is anything they would want to tell me in advance of me running the check.  This is usually when I hear that they have “messy credit”.  I always send an interview confirmation email.  This is when I tell the candidate again that the process includes a criminal and credit background check.  I also make sure that the credit and criminal checks are run only after they have completed the application that includes an area to give me signed permission to run the checks.

If an applicant is going to be rejected based on credit report information, my clients must make a “pre-adverse action disclosure” that includes a copy of the credit report and the summary of consumer rights under the FCRA.

And lastly, since  the percentage of minority group members in the U.S. with poor credit is higher than non-minorities, employment decisions can disproportionately affect minority applicants.  This is a violation of Title VII of the Civil Rights Act.  And therefore, its critical that a business request credit checks consistently and prove that this type of selection criteria is justified because of the job or business necessity.