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Firm's use of credit checks grows

Job screenings tighten amid post-9/11 fears

By Davis Bushnell, Globe Correspondent, 5/2/04

Individuals lucky enough to be asked back for a final job interview often are asked to do one more thing: sign a form authorizing a company or organization to look into their credit histories.

Twenty years ago, employment specialists note, credit checks were conducted mostly for people wanting a job at a bank or credit union. But now, as a result of the Sept. 11, 2001, terrorist attacks and the recent rash of corporate scandals, employers in industries from banking to retail are increasingly using credit reports to screen applicants for temporary and full-time jobs.

And because the job market is still tight, specialists say, candidates are more resigned to the fact that credit reports are a price that has to be paid for getting work.

In agreeing to having their credit checked, job seekers are saying, ''This is life these days," suggested Paul Reardon, a partner of Reardon Associates, a temporary job placement firm with offices in Burlington and Dedham. His firm, he said, gets credit reports on about 20 percent of candidates being considered for temp positions in all industries.

Employee rights advocates are quick to point out, though, that credit reports are not always up-to-date and accurate. Advocates also argue that minorities and the poor frequently come up short in the credit reporting process and don't get jobs they need because of an inability, in many cases, to keep up with their bills.

But the Boston office of the American Civil Liberties Union and the Massachusetts Commission Against Discrimination report that they have had no cases lately involving individuals who believed they lost out on a job, unfairly, due to credit checks.

Anyone who thinks, however, that exhaustive pre-employment screenings are a short-lived phenomenon is not being realistic, according to privacy specialists like Robert R. Belair, a partner in the Washington law firm of Oldaker, Biden & Belair.

''Tens of millions of Americans are now being backgrounded in some cases, many times," Belair said. ''Post-9/11 is changing America."

Data is unavailable on the number of credit checks conducted annually for employment purposes. However, last year 1.2 billion reports were prepared for banks, mortgage companies, and other lenders, said Norman Magnuson, spokesman for Consumer Data Industry Association.

The Washington, D.C., trade group represents the three largest credit reporting bureaus: Equifax of Atlanta, TransUnion of Chicago, and Experian of Orange, Calif.

And the number of employers requesting credit reports, which cost them about $15, is rising. A 1996-2003 survey by the Society for Human Resource Management revealed, for example, that the percentage of companies that said they conducted credit checks nearly doubled over that period.

''Companies are ratcheting up background searches, including credit reporting, which is a natural screening tool. If a job applicant has nothing to hide, that makes him or her an attractive candidate," said Keith Greene, director of organizational programs for the society, based in Alexandria, Va.

Credit checks are governed by the federal Fair Credit Reporting Act of 1970, which was amended significantly in 1996. The newest provisions require an employer to tell a job applicant that a credit report will be conducted if he or she signs off on it.

Then, if the report is negative, the applicant must be given a copy, said Anthony Rizzotti, a partner and labor specialist in the Boston office of the Ropes & Gray law firm.

Based on his experience, compliance by employers with the act has been ''pretty good," Rizzotti said, adding that companies are intent on ''being careful about hiring, especially people for senior executive positions."

However, nobody has a good handle on either the compliance issue or how many job applicants are rejected because of their credit reports, according to Belair.

A credit report on an individual details credit card and loan balances, payment records, collection agency actions, tax liens, and bankruptcies, said Magnuson. Based on what is found in a credit history, a person is given a credit score, which tells an employer whether that person is financially responsible, he said.

A job seeker who wants to get a copy of his or her credit report before landing an interview should contact one of the top three credit reporting bureaus, said Magnuson.

Each charges $9 for a report; in Massachusetts, state regulations allow residents to request one free credit report annually from each credit bureau. Equifax can be reached at 1-800-685-1111 or www.equifax.com, TransUnion at 1-800-888-4213 or www.transunion.com, and Experian at www.experian.com.

Many times, an employer ''is understanding if an applicant is upfront" about credit problems as a result, say, of a divorce or losing a job, said Nancy Atkins, a retail placement specialist who works in Concord.

Retailers are among those employers who routinely purchase credit reports on their job applicants, according to the 2,200-member Retailers Association of Massachusetts. In part, they do so because some jobs in retail involve working with money or expensive goods such as jewelry.

Today, employee theft is a bigger threat than shoplifting and accounts for half of the industry's annual losses, which in this state totals $1.5 billion, said Jon Hurst, head of the retailers trade group. ''Credit checks give retailers the tool to protect both employees and customers" from people who might be hired if their unfavorable credit histories had not been flagged, he said.

Other employers use the reports sparingly. Raytheon's Integrated Defense Systems, which has some 11,000 employees, orders credit reports only on job candidates ''who would be working in finance or any cash-reporting area," said spokeswoman Carolyn Beaudry.

Before candidates ''for director-level positions or above" are hired by Staples, their credit records are checked, said Debbie Hohler, a spokeswoman for the large, Framingham-based office supply chain. Currently, there are 400 of these senior managers on the payroll in the United States, Hohler said. The company employs 60,000 people worldwide.

Each of Boston-based Eastern Banks 1,500 employees have cleared the credit report hurdle, spokesman Joseph Bartolotta said. ''We request a credit check prior to making an offer to a candidate."

Credit report policies vary from bank to bank but generally records are checked on applicants ''who would be in money-management positions," said Bruce Spitzer, spokesman for the Massachusetts Bankers Association.

Some employers are disinclined to use the reports for screening potential hires. Beth Israel Deaconess takes a contrarian view of credit reports, said the hospital's senior vice president for human resources, Lisa Zankman.

''We're reluctant to invade people's privacy," said Zankman. ''And for us, credit reports are not as relevant as criminal background checks."

Even if chief financial officer candidates were being considered, the hospital would rely on reference checks for turning up anything negative in the candidates work histories, Zankman said.

The hospital's policy has some merit, said Lewis Maltby, president of the National Workrights Institute, a nonprofit group in Princeton, N.J.

''Employers frequently misuse information in credit reports, which often contain data that is not current or just plain wrong," Maltby said.

However, anecdotal evidence suggests that job seekers with nothing to hide support employers that conduct extensive background checks, including credit histories, said Belair, the Washington lawyer.

That's in contrast to many other job applicants whose résumés, he said, ''are full of inaccuracies."

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