TransUnion, one of the three major credit-reporting agencies, is making efforts to protect the use of credit reports by employers in their employment screening process. According to reports, this is in response to the counting number of states threatening to eliminate the said practice.
Legislators in Illinois said that TransUnion attempted not just once but twice to initiate dialogue regarding the then proposed Employee Credit Private Act, and the said dialogues would have made the law worthless.
According to a partner at Outten and Golden LLP, attorney Adam Klein, the use of credit reports as a screening tool will just make lesser opportunity to more people leaving poor people poorer. He stressed that the economy will not benefit in any ways in this practice and that the only ones gaining from this particular scenario are the credit reporting bureaus.
Credit reporting agencies, better known as credit bureaus, collect information from different furnishers, which can be a credit card company or other financial institutions. Basically, credit-reporting agencies make money by selling this information to people or organizations and are permissible by the law. The people or companies buying these data include those from the lending industries, housing and now most recently a potential employer.
According to an industry analyst, Carter Malloy, the money earned by credit bureau TransUnion from companies who are buying credit report for employment screening purposes, make up 5 percent of the agency’s yearly revenue.
Some groups support the use of credit reports in screening applicants. The Society for Human Resources Management is one of those who believe that credit check is a legitimate tool that could help employers assess their prospective employees. However many are not convinced about this matter. Moreover human rights advocates, consider this practice as being discriminating. Experts and politicians see the possibility of trapping more Americans to experience a Catch 22, if this practice continues. Most people who has lost their jobs, might have ended up with bad credit, and if bad credit will be a basis for applicants to be disqualified from job applications then people with bad credit will not have jobs.
To avoid more people to be caught in such scenario, 18 states are now proposing to regulate employers’ use of credit reports. According to a University of Chicago professor, Virginia Parks, until now there is still no study showing that contents of credit reports can be good predictors of a good job performance.
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