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Can Employers Use Credit Histories When Hiring? EEOC Says: No

Last week we looked at the increasing number of discrimination lawsuits against employers. We examined statistics from the Equal Employment Opportunity Commission which showed an increase in discrimination lawsuits over the last three years. Increases will likely continue as the acceptable definitions of "discrimination" expand.

It seems that the EEOC is not just reporting statistics - it is contributing to them as well. The EEOC has filed a discrimination lawsuit against Kaplan, which is a for-profit college. Kaplan is charged with using applicants' credit report histories in making hiring decisions. Applicants with a negative report are being denied employment.

It is rare for a government organization like the EEOC to involve itself in private sector lawsuits. However, representatives for the group think that this particular form of discrimination is becoming common enough to warrant action.

An EEOC spokeswoman noted that credit histories are a bad indicator of job candidate potential. She says that scores only reflect an individual's ability to pay his bills. The scores do not prove anything about his character, skills, or responsibility.

The spokeswoman also claims that using credit histories in hiring decisions is especially discriminatory towards African Americans. They are statistically more likely to have poor credit histories.

Kaplan defended its choice to use credit histories, saying that many of its employees are expected to handle money and track budgets. Credit histories in this case would directly relate to expected job performance.

Other legal and employment groups are also defending the use of credit histories for hiring decisions. Advocates say that credit histories are reliable predictors of performance. Companies with a large pool of applicants can also use these histories to quickly narrow down their choices.

Right now the practice of using applicant credit histories for hiring purposes is legal. The outcome of this important lawsuit may just change that.

Source: New York Times online, "E.E.O.C Sues Kaplan Over Hiring," Steven Greenhouse, 21 December 2010

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