Bad credit? No credit? No problem.
With Illinois’ unemployment rate at a staggering 11 percent, employers can afford to be more selective in whom they hire. But a new bill could give job seekers with bad credit a fighting chance in landing a position.
Rep. Jack Franks (D-Woodstock) has introduced a bill, HB4658, creating the Employee Credit Privacy Act, which would protect applicants who believe they were discriminated against because of their poor credit. Washington and Hawaii have passed similar laws restricting credit checks by employers; a credit check ban approved Monday by the Oregon legislature will go into effect July 1.
While employers say credit information is vital because it is an important part of the screening process, opponents say such information is private and irrelevant to job performance.
Franks said business associations are fighting the bill, but the measure is a necessary step to help job seekers in this failing economy. The need for the bill struck him on a family road trip, he said, when he saw a former growth area littered with foreclosure signs hit hard by the recession.
“I want to protect individuals who through no fault of their own have lost their jobs,” said Franks. “Their credit goes into the tank, and they can’t get another job. It’s a perpetual cycle.”
Franks said that the rights of the business owner should be weighed against the public benefit. As a business owner, Franks said he understands both sides of the issue but doesn’t want to create a permanent underclass.
“Let people have a second chance,” Franks said.
Historically, 28 percent of companies have used credit checks on selected applicants, but over the past year that number has spiked to 47 percent, according to a 2010 survey from the Society for Human Resource Management.
Mike Walters, executive director of the Southwest Illinois Employers Association, said the bill restricts business owners and employers. Employers need to have as much information as they can get in hiring, he said, and the proposed legislation severely limits that ability.
“If an individual contracts someone for a job, they have a right to see if the person they hire has defaulted on payments,” said Walters. “If it’s good for the individual, it should be good for employers.”
Walters questioned how the bill would be enforced and whether employers would take their business out of the state if the bill passed.
“If you have any common business sense, you’d understand this is a bad bill,” said Walters.
University of California-Los Angeles Public Policy Department Chair Michael Stoll said while employers should not discriminate against people with lower credit scores, there are instances when accessing a person’s credit information can be a valuable instrument.
Stoll said employers might try to find ways around the restriction by discriminating against low-income applicants. The bill could have unintended consequences and should be limited in order to be effective, he said.
Mark Denzler, spokesman for the Illinois Manufacturers Association, said he opposes the bill because it restricts the use of an important tool employers use when evaluating job applicants. The law already protects certain individuals who have bad history, said Denzler. Under current law, credit reports can’t disclose bankruptcy cases more than 10 years old, or civil suits and tax liens older than seven years.
Denzler said employers only check a small percentage of applicants because of the credit checks’ cost — $15 per applicant.
“Employers don’t do credit checks on everyone,” Denzler said. “From the time a person applies to a final stage of interviews, there is an opportunity for employees to explain they’ve gone through a rough patch.”
Credit checks serve a more important purpose than simply providing an applicant’s credit history; they verify previous employment and former addresses, Denzler said. Credit checks also protect employers from lawsuits if they fail to properly check an applicant.
“I understand the man or woman who has fallen on hard times, but the employers have a right to vet their applicants,” Denzler said.