Can an Employer Run Credit Checks on Prospective Employees in Georgia?

February 12, 2015 | Charles Bowen

According to a 2012 survey, nearly half of employers in America run credit checks on potential employees when considering them for an open position. The fairness and legality of this practice has often been questioned and is considered by some a barrier to employment, particularly to those of lower socioeconomic status. A new bill pending in Georgia may prevent employers from conducting credit checks as part of the hiring process. Here is what you need to know:

If passed, House Bill 163 (known as the “Fair Chance at Employment Act”) will allow employers to run credit checks only if it may be considered a “bona fide occupational qualification.” This will apply only if the information contained in the credit check is related to the position for which the employee or prospective employee who is the subject of the credit check is being evaluated because the position:State of Georgia House of Representatives

  • Is a managerial position which involves setting the direction or control of the business;

  • Involves access to customers', employees', or the employer's personal or financial  information other than information customarily provided in a retail transaction;

  • Involves a fiduciary responsibility to the employer, including, but not limited to, the authority to issue payments, transfer money, or enter into contracts; or

  • Provides an expense account.

If you are a small business owner, it is important to note the bill may not be applicable to you.  The bill specifically defines an “employer” as “any person engaged in business and having 50 or more employees.”

Depending on whether or not this bill is passed, credit checks may or may not continue to be a pervasive practice in Georgia. Until the decision is made, here are some thoughts to consider:

Considerations for Potential Employees

  • Be proactive.  Pull your own credit on an annual basis to not only see how it fares but also to check for any mistakes.

  • Take steps to improve your credit if possible and prepare an explanation for any accurate but negative information.

  • If you do consent to a credit check and are not offered the position for which you applied, ask if your financial history played a role in the decision.

Considerations for Employers

  • Review your hiring and recruiting processes and determine if credit checks are necessary for some or all positions.

  • Understand that errors on credit reports are not uncommon and there are a variety of legitimate reasons a qualified candidate may have poor credit (student loans, debt caused by health issues or natural disaster, etc.).

  • Stay abreast of policy changes that may impact the legality of this practice in order to limit your liability.

Hiring decisions are critical to every organization. Not only does employee compensation often consume a large percentage of the overall operating budget, the people hired are being trusted with the life of the company, firm, non-profit or agency which they now represent. Due diligence is an absolute must during the recruitment and hiring process, but carefully consider whether credit checks are necessary given the position.

Credit Checks - legal for hiring?

The generally-accepted rationale for conducting these credit checks--particularly for executive level positions or those with corporate financial responsibilities--is to identify any red flags that may call into question an employee’s responsibility, decision-making skills and to limit the risk of theft or embezzlement by people in challenging situations.

The Fair Credit Reporting Act (FCRA) developed by the Federal Trade Commission (FTC) mandates that employers obtain a job applicant’s authorization before requesting a credit report and notify job applicants if the employer plans to take adverse action (such as rejecting a job application or denying a promotion) due in any part to information on a credit report. Employers must also give the applicants the opportunity to explain any negative findings or dispute incorrect information should it exist.

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Topics: Georgia Employment Law