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Law prohibiting employers’ credit history use in Illinois becomes effective January 2011

By Brian Anderson
Published: Friday, March 25th, 2011

20Governor Pat Quinn recently signed a bill into a law which regulates the employers’ utilization of credit histories to identify, who they hire and who they will promote. This law aimed at eliminating the hindering factor for jobseekers, who earned negative credit scores, due to the economic recession.

According to Governor Quinn this newly implemented law will prevent employers from using information that is not proven to be an indicator of a person’s job performance abilities and character such as the credit history.

The Employee Credit Privacy Act created under the Illinois Bill 4658 prohibits employers from inquiring and utilizing the credit histories of their applicants and current employees in deciding on important aspects such as employment, discharge, recruitment, compensation or promotion. This bill only limits employers’ access to applicants and employees’ credit reports, but does not regulate background checking that excludes credit histories.

Since, there is no statistical evidence showing a direct relationship between the credit report contents and person’s ability to perform his/her job well, there is no solid ground that could justify the need to incorporate credit checks in determining, who to hire, who to fire or who to promote.

Several states are expected to follow the steps of Governor Pat Quinn of Illinois, and about 18 states already passed proposals on regulating the use of credit histories by employers. Indeed some politicians and other groups are convinced that this practice cannot be legitimized. If credit histories can influence the chance of people to be hired it can be expected that more people will have fewer opportunities, given that the recession recently damaged millions of credit scores.

Credit reports are not primarily created to feed the screening tool-needs for the recruitment processes of companies. However, despite the issues attached to the legitimacy of the use of the credit report for employment purposes according to the survey conducted by the Society for Human Resources Management (SHRM) 60 percent of employers are conducting credit checks on some of their applicants. This percentage has increased noticeably from 2006 where only 42 percent are involved in the said practice and in 1998 only 25 percent of employers conduct credit background checking.

The SHRM survey also revealed that there are companies that are making use of credit check on all applicants. These organizations comprised 13 percent of the surveyed population while 47 percent of organizations only perform credit checks on selected job positions. These job positions are those highly related to handling financial matters, accounting and banking.

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