Credit Scores in Employment Background Checks Banned in Illinois

Published November 15, 2010

A new Illinois law banning employers from using credit scores in hiring decisions has led to strong debates over the whether the common practice is a fair measure of an applicant’s eligibility.

Illinois joins Oregon, Washington, and Hawaii as states prohibiting the use of credit information in employment decisions, and some activists are calling for a nationwide ban.

“The new law from Gov. Quinn is a bit like Nero fiddling while Rome burns,” said Sheri Rothenberg, a Chicago attorney who specializes in employment law. Rothenberg argues the law is not a real advance for employees because many employers don’t use the credit scores as a sole determinant in their new-hire process anyway.

No Explanations Behind Scores
Proponents of the law, including several consumer groups, argue the use of credit scores is unfair to many job applicants because the scores don’t explain the circumstances behind certain debts, such as unexpected medical expenses.

Exceptions to the ban were written into the law for employers that handle certain kinds of sensitive information, such as businesses dealing with banking, insurance, trade secrets, or state or national security.
Gov. Pat Quinn (D) argued using credit scores to determine employment is both unnecessary and inappropriate.

“A job seeker’s ability to earn a decent living should not depend on how well they are weathering the greatest economic recession since the 1930s,” Quinn said in a press statement after signing the bill into law. “This law will stop employers from denying a job or promotion based on information that is not an indicator of a person’s character or ability to do a job well.”

State Senator Don Harmon (D-Oak Park) sponsored the legislation. He argues using credit scores in hiring decisions makes it difficult for those with checkered credit histories to recover, because their bad credit history could stop them from landing a job that would enable them to improve their financial situation.

Red Flags for Fraud
Defenders of the use of credit score checks to help make hiring decisions say the ban takes a potentially useful tool out of employers’ hands. For many employers, credit scores contain important information that can be relevant to job performance.

According to USA Today, a recent study from the Association of Certified Fraud Examiners found “the two most common red flags for employees who commit workplace fraud are living beyond their means and having difficulty meeting financial obligations.”

Mike Aitken, director of government affairs for the Society for Human Resources Management, told USA Today a nationwide ban would remove an important tool for employers, and that credit checks are not being abused. Aitken cited a recent Society for Human Resources Management survey that determined only 13 percent of employers perform credit score checks on all potential hires.

Other critics say the law was largely a sop to win votes from liberal consumer and minority groups. The bill became law during a heated campaign between Quinn and his Republican challenger, State Senator Bill Brady (R-Bloomington). Quinn carried just three of Illinois’ 102 counties and won with just one half of 1 percent more of the vote than Brady received. But one of the counties Quinn won included Chicago, which churns out Democrat votes.

Matthew Glans ([email protected]) is a legislative specialist in financial services for The Heartland Institute.