No, but do they? Massachusetts bankruptcy clients ask us this question all time. In a case filed by the federal credit report will come into sharper focus. Some states have banned using credit reports in hiring. Others have allowed their use on only a limited basis. Nevertheless, surveys show that half of all employers use credit histories sometimes.
The argument against using credit reports for employment are clear: they are often inaccurate, they are not necessarily good indicators of job performance, they fail to tell the whole story of why a payment was late and, with respect to bankruptcy in Massachusetts, they fail to tell the story at all. Furthermore, managers who make higher salaries do not necessarily understand why lower paid employees might have had a credit problem and that that problem would be unrelated to work ability.
The EEOC’s case, however, is focused on the statistical result of using credit reports: there is a “disparate impact” on black candidates for jobs. The EEOC files lawsuits in less than 1% of its cases, so there is a likelihood that they are literally trying to make a federal case of this issue. The lawsuit, filed in Cleveland, claims that the Kaplan Company is in violation of TITLE VII of the 1964 Civil Rights Act, as amended in 1991. The law says that employers may use credit history (reports) in hiring if it can be shown that there is a very strong correlation between credit history and job performance.