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Oregon Bans Credit History Checks by Employers

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The Oregon Legislative Assembly has passed House Bill 1045, which would prohibit the use of credit history for use in employment purposes (it was actually signed by the governor in late March). In other words, employers in Oregon cannot use the information they collect in a credit report to make am employment decision such as hiring, firing, or demoting an employee. The law, obviously, goes into greater detail but the writing on the wall is clear – you cannot use credit checks to make any sort of employment decision.

My take on this is that it’s about time a state stepped up and stopped this practice. Not many employers do it, only about 35-40% according to an Oregon Bureau of Labor and Industries spokesman, but that’s far too many.

The law does allow exclusions for:

  • Employers that are federally insured banks and credit unions;
  • Employers that are required by state or federal law to use credit history for employment purposes;
  • The employment of a public safety officer who is a member of a law enforcement unit;
  • Employers if that information is “substantially job-related and the employer’s reasons for the use of such information are disclosed to the employee or prospective employee in writing;”

If employers violate this law, employees or prospective employees are able to file a complaint and receive damages, compensatory damages or $200, whichever is greater; plus punitive damages.

We need a federal law mandating this so we can save state legislatures some time.

{ 191 comments, please add your thoughts now! }

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191 Responses to “Oregon Bans Credit History Checks by Employers”

  1. Leena says:

    I think the consequences that come with bad credit, Benjamin are suppose to be higher interest rates and a lack of ability to get some types of credit until you can prove yourself to be responsible with money. Believe me, that is plenty of consequence in a credit-driven culture.

    The thing is, Benjamin do you want good employees or do you want to punish people? Is this about morality as you define it or a practical assessment of someone’s skills and ability to perform a job?

    I hire people now, in a company that does credit checks only for positions in the accounting department. I know others in my company who have filed for BK and are great employees. Mind you, I would have to admit they had better reasons then mine but still you can’t make a generalization as you say.

    If you hire people, I hope you take the time to look at more than their credit. I hope you take those five or ten years into account at XYZ company, and their education and skills and realize that this person just might be your best candidate after all.

    Speaking of which, we hired one of those credit paragons for the accounting department 2 years ago. He no longer works for us because he killed someone drunk driving and is in the clink. Apparently, he had not let his alcohol problem lead him to abusing his credit cards, but someone wound up dead because he had to drive home from the bar.

    Good credit does not equal great employee, and bad credit does not equal loser.

  2. Benjamin says:

    Leena, you are absolutely right. Good credit does not equal great employee, and bad credit does not equal loser. However, credit history can have an impact on employment performance. Because of this, a business owner should have the right to take that information into account (along with all other information) when making their hiring decision.

    Of course education and prior work history matters, but credit matters too. I have seen plenty of people who couldn’t get to work because of money related issues, such as not having enough money to fix their car and many others. While its possible to have terrible credit and still have enough money to fix your car if it breaks, the former makes the latter much more likely to be a problem.

    A hiring decision in the end is a judgement call by the business owner. They should have as much information as possible to make that call, and the right to decide the value of that information for themselves.

    Thank you for listening.

  3. Leena says:

    I am glad Benjamin that you are taking more into account than credit, because for some employers, albiet not the majority once a credit reports comes back with spots, the candidate is finished.

    I also heard this interesting perspective from an Executive friend of mine who works for a company that checks credit for most employees. He said: “See I WOULD hire you. Your BK closed a year ago, you are paying faithfully on your student loans and you obviously have a strong work history. Even BK indicates you did something about your debts, and your history since then tells me you learned from the experience.” He went on to say he would not hire someone who right now today had outstanding unpaid debt and no plausible explanation for that, like long term unemployment.

    I cannot say I truly agree with his perspective, but I understand his thought process.

  4. Benjamin says:

    The employers and the executive that you refer to Leena should have the right to make those decisions, whether you agree with their perspective, understand their thought process, or not. If I chose to take a candidate with any credit history, or if I chose to reject a candidate with the slightest blemish on same, my rights should be protected either way.

    Employers are offering a job. It’s a gift, not a right entitled to anyone who chooses to work for them. Therefore employers should have the ability to decide who they hire. If this freedom of choice did not exist, everyone’s first job would be their dream job, dream companies would have unlimited employees of widely varying skill levels, and no one would ever bother trying to make themselves an attractive candidate, because it wouldn’t be necessary.

    Thank you for listening.

    • Theresa says:

      Benjamin: I can honestly say that a job offer is NOT a gift. It is merely exchanging ones time, efforts and energy for compensation. A gift has no strings attached. Yes, you as an employer, have the right to choose a candidate. Any time you make a decision on a candidate, time will tell. Life happens and some people do not make good choices with the way they handle their circumstances. Financial hardship can happen at ANY TIME in a person’s life, and not always be the fault of the candidate. Things can change in a NY minute!(which is considerably faster)

  5. NC Girl says:

    That’s great that your executive friend puts logic behind his decisions instead of seeing something negative and shutting the book so to speak. However, OVER 50% of credit reports contain errors. Literally, you could take someone’s name and address out of an outdated phone book, and post something negative on their credit and have to make them fight to get it off. You think that sounds insane, but trust me. I am dead serious. Our credit reporting system and collection company practice is completely corrupt. I have been a victim of ID theft- trust me, even with working with the AG, FTC, and police department- you really don’t stand a chance and your credit could well be ruined forever with no recourse. If you looked at my credit report you would see about 10 different collection accounts that were opened only with my name and previous address- (cable bills, Columbia House, BMG, medical… ect) No credit cards are listed because those take ssn’s to set up and this person didn’t have mine. However, all they needed was my old address and my name. Heck, they wouldn’t have even needed to spell my name right! Now I can’t get it off my credit because the collection companies say that it was me that set up the accounts. IT WASN’T ME! They won’t take them off with a police report, the AG can’t even force them to take them off, and the fines imposed by the FTC are laughable! Until it becomes less profitable to aid in fraud, these companies will not stop. There is a good petition for this problem here:

    http://www.petitiononline.com/nwchange/petition.html

    Until this problem is fixed we should never consider a “accurate, bona-fide information”

  6. Leena says:

    Benjamin, not only are the issues that NC Girl mentions as real as a heart attack, there ARE other issues at stake here besides the employers “rights”.

    In the era of the civil rights movement, some (many actually) empoyers argued that descrimination was their “right” as business owners and employers. Others argue they had a “right” to serve or not serve whoever they wished in their own business. Truth be told, you would likely still get more than a few who argued that point today. However, the public good of a level playing field and you or I not being able to discriminate based on race, ethnicity, gender ect. trumpted those “rights” finally by law with the passage of the Civil Rights Act.

    Now, the issue is behavior rather than race, I will grant those are different. However, if you are able to decide to not give someone, anyone a job because they have bad credit, a great work history, education, and experience, is that really a level playing field for the applicant? In my opinion, you are being allowed to judge that person on something that does not have bearing on their work, and that may in fact be very inaccurate. What the laws, like your in Oregon are forcing you to do is to prove relevance and that is not an unreasonable expection. Personally, I think the ONLy time credit has relevence is when an employee has basically unlmited access to comany coffers AND gets to decide where that money goes and how it is spent without checks and balances from higher ups. In other words, virtually all lead accountants/CPA’s and top tier execs. Not because they will “steal” (NO proven correlation with that. You want to know who will steal do a criminal and employment check)but because they are actually involved in significant, independent decisions about comapny fund.

    I know a lot of conservatives love and want a world where the employer and only the employer makes all the rules. I do not think, however that that world would be at ALL to the public good.

    This thing of claiming that credit is some great indication of moral value that you as an employers have a “right” to know is one very, very slippery slope.

    What else would you like to know? How many drinks I have each week/month/year? If I dress slutty in my private life? Details of my sex life? Who my friends are and what my political affiliations are? What my health status is in detail to determine if I would EVER pose any risk to company or raise your insurance rates (above and beyond the requirements of the job)? If I have ever smoked cigarettes? ALL of these things can, by some arguments reflect risk, moral worth, and “give a lot of valuable information about a candidate” according to some. Let’s not forgot number of children you have, if you plan to have any, marital status, and have you made bad choices in your personal relationships (for those who have been divorced a time or two). – No wait, that is already illegal.

    I respect you as a business owner, Benjamin and when this economy picks up a little I hope to change careers and join your ranks by starting a little business of my own. I am very fortunate to have a husband now who can help me with that.

    I just think you are on the wrong track in thinking that “employer rights” are the only issue at stake here.

  7. Leena says:

    I also wanted to add that a job is no gift-it’s a sale of my labor to my employer. The opportunity may be a gift, the dedication I show to my employer may be a gift, but the bottom line is a transaction between us. My employment supports not only me and mine, but the economy as a whole in the goods and services I can use because I am employed. Society as a whole has a vested interest in my employment. That employment should not be denied on a pile of assumptions, possible errors, and flat out falsehoods in the name of “employer’s rights”.

  8. Benjamin says:

    Ok Leena, I will retract my earlier comment and clarify. You are right. A job is not the same as a gift, there are strings attached. However, it is primarily offered by the employer to the employee. When its the other way around, its more generally subcontracting or outsourcing of services, which is very different. Employees come with all sorts of protections and benefits that independent contractors do not have, and do not necessarily offer anything more than an independent contractor would; in many cases, less, since contractors usually have pay directly tied to measurable performance which does not always follow in employment. I hope that clarifies what I meant.

    A ‘level playing field’ as you describe would involve what I said earlier, no strings attached whatsoever to employment meaning no ability to ‘discriminate’ between good work ethics and bad, job history, interview ability, skill set, or anything else. That is where that path leads if we continue to level the playing field. It basically means that business owners would have to accept anyone, which does not work towards the public good because business would become incredibly inefficient as a result of no ability to select employees.

    As for what information is deemed personal and what is deemed appropriate for a business owner to know or ask, in my opinion we have erred too far on the side of personal. Some people believe that drug testing is wrong, that credit checking is wrong, that employers should have no right whatsoever to ask any question they don’t want to answer, whether it could affect job performance or not. People have no problem posting the most intimate details of their lives on facebook and similar sites where almost anyone can see them; every day the lines between private and public information become further blurred. The reason that letting employers know the same things is such a big deal is because people fear it will negatively impact them.

    Employers offer jobs and have requirements for those positions. Employees can choose to apply at companies whose requirements match what they are seeking. If I don’t want to have my credit checked, I can choose to apply to a company that doesn’t do that. Or I can choose to start my own company and not check the credit of my employees. Forcing employers to limit their judgement to what information ‘some’ feel is important is wrong, particularly if the ‘some’ are people who are not employers themselves. I hope you do enter the business world from the other side and see the challenges people face as an owner and employing others. I’m sure it will broaden your perspective.

    Thank you for listening.

  9. Leena says:

    I am not a business owner now Benjamin, but I do hire people as a Manager and I do have staff and see the challenges. I just do not think checking credit is a reasonable way to address those challenges, or a fair one.

    I just plain think that credit checks are irrelevant for most jobs and an invasion of privacy that employers should not have a right to look at the majority of the time. The same as they do not have a right to ask about number of kids, marital status, or health issues unrelated to the job.

    A level playing field is a fair one- NOT one with no strings attached. Employers have always had a great many tools including resumes, references, and criminal checks by which to evaluate employees. Drug tests are controversial, I tend to air on the side of doing them since we do criminal checks and non Rx drug use is illegal activity. Facebook? I would not want to work for the person who is peering around Facebook mining for information. My own page is private and for my friends only. My boss is on my Facebook page because I trust her to be on it and not decide to terminate me because she dislikes my opinions. If a prospective employer asked me, I would likely say no and think they were creep (and they would have to ask, my security settings are high).

  10. Benjamin says:

    I’m just curious Leena, but how do you validate criminal background checks for employment? The same arguments apply, its an invasion of privacy, it may have no bearing on their ability to do a job, etc.

    I think you’re allowing your personal bias to affect you here. This sounds less about fairness than it does your individual views on credit scores being a less-than-useful tool. Which is fine as an individual view, but to apply it as the standard for others is where I object.

    Fairness means going along with views you don’t agree with simply because its the right of the other to hold that view.

    I am a business owner and a financial advisor. I see people from many different perspectives and I can easily give many many examples of where their own decisions regarding personal finances affected their functionality at the workplace. This is why I believe credit reports can help as one of many tools in an employers toolbox to evaluate people.

    If, and please look at these words carefully, I was able to choose between hiring 2 people, both exactly the same except that one person clearly did not pay their bills (for any reason) and the other did pay their bills, I would choose the latter because that’s one less thing to worry about. To me, that person would be less likely to have a car problem that lasted 2 months and kept them breaking down on their way to work, instead of something they fixed right away, or less likely to hear that because they have been evicted from their apartment or foreclosed on their house they have to move to another state to live with family, and so can no longer work for me. These are real situations that happen every day, and in many cases they may not be the fault of the person involved (of course they could be as well), and they can happen to people with good credit too, but as an employer if I can improve my chances in avoiding them, it behooves me to do so.

    Thank you again for listening. If you still feel as you do I understand, and I respect the differences in our opinions. Good luck to you Leena.

  11. Leena says:

    I think criminal history is-or can be truly a whole other situation than credit checks. However, that is a large topic i will not bore you and everyone else with.

    My executive friend and I actually discussed some of the situations you describe, and while I remain against credit checks I can see the argument that to have outstanding debt makes someone a greater risk in terms of encountering the situations you describe.

    Perhaps it is why I am hearing about employers who far prefer someone who has filed bankruptcy to someone who is still in a credit card debt mess. People who have discharged debt in bankruptcy are not moving home because they can;t afford rent, are better able to take care of their cars because they are not behind on bills and do not have the alledged “motivation to steal” because the debt is gone.

    It seems unfair in some respects to prefer a BK filer over someone who is still trying to repay, but I understand the cold logic.

    Good luck to you, too Benjamin.

    • Benjamin says:

      I share your concerns about bankruptcy filing. I’m not sure that Chapter 7 (complete discharge of debts) should be allowed at all, and I certainly would take that into account versus someone who is working to repay what they owe.

  12. March77 says:

    If you are concerned about your identity being stolen from credit reports, I recommend using an identity theft protection service like Lifelock. As a contracted representative of Lifelock I can offer you a 10% off discount on service at http://www.lifelock.com/landing/real/safe with promo code SAFEID1. Hope this helps.

    • NC Girl says:

      Too bad lifelock doesn’t protect against someone opening accounts simply put in your name and previous address. It does not work with collection accounts for billed services that were never verified as you with the credit burs in the first place. As soon as lifelock can block bogus collections on your reports, let me know.

      • Leena says:

        Agreed. One huge issue with credit reports being used for much of anything is issues with the quality of the information. As a property manager who has worked with both types of reports, I can tell you that criminal records are around 90% accurate, and credit reports are a lot closer to 60% which considering that some jobs (banking, according work) are relying very, very heavily on this information is pretty scary.

  13. gigi says:

    Quite frankly, i’m appalled by the use of credit checks as a determining factor of employment. It’s a catch-22, as the person, who is looking for a job to repair his credit and change his life cannot even get a job because of the status of his credit. How can one improve his financial situation if they are being assessed as a good employee on the basis of credit? just another way for the “haves” to distance themselves away from the “have nots.”

  14. Morris says:

    I know this is a necro post or comment, but I do need to say this. Yes, I was young and stupid and screwed my credit up as I live and grewup in an area where we never used credit for the most part. (Small close-knit farming community) Since then I have been trying to fix that but have been unable to due to employers that base their employee selections off of a credit report. How is someone with bad credit supposed to fix those issues when they have bills to pay and can’t find a job with a decent enough salary to actually support their family and pay off their debts. I have a great work ethic, just ask any of my past or current employers, but it is hard to move up from a PT job at Walmart or McDonalds. I normally have just enough left over after the bills (power, water, gas, insurance, sewer, rent – no cell, no cable, no internet) to maybe take me kids to McDonalds once a month. I keep enough in my bank account to purchase a replacement vehicle or repair my current one if needed. ($2000) I am unable to get a decent job due to people who think my credit shows them how good of an employee I am. I truly wish that this would become federal so that I will be able to get out of a rut as well as all the others that are like me.

  15. ccamp says:

    how does this apply to promotions? i am currently undergoing a credit check through my work, although already been offered the job, and they’re requiring that i have a certain amount of payments to a couple delinquent accounts i havent yet paid off before they make a decision…with this law in place, it just doesn’t seem to be sitting well. anyone have a 100% answer to this and not just opinion? thanks.

    c.

  16. nk says:

    I think it is about time to stop companies to smell your dirty laundry. It is ironic that these companies had a rap sheet of bad credit and still borrowed money from the government. I hate double standard. Federal government should ban this practice.

  17. Anonymous says:

    I’ve been denied employment due to a background check that included a credit check. I live in Oregon where this is supposed to cease. The background history I passed. The statement I received stated that I was denied the job based on my credit. Who do I contact to appeal?

    • Tod says:

      Anonymous – The bill was only put into effect in March when it was signed by Governor John Kitzhaber. Prior to that, we were all subjected to the illogical tyranny of the Republican regime. You can appeal by contacting the Oregon Bureau of Labor and Industries at: http://www.oregon.gov/BOLI/

      Best of luck!

      Tod


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