Credit Report Screenings Challenged in Illinois

As a consumer, we all have rights under the Fair Credit Reporting Act to have our personal information protected, including our credit history. When you’re applying to new company, you’re never quite sure what to expect. Every company has different expectations and requirements of their candidates, often causing the employment background check process to vary by industry and company. On top of these requirements, the laws continue to change – adding an additional layer of complexity and making it crucial for HR teams to understand regulations pertaining to background screenings. And this is especially true for using credit reports as part of a company’s background screening policy.

Complying with State Regulations for Credit Reports

Several states (such as Illinois, California and Maryland) and cities (such as New York City and Philadelphia) have enacted laws complying with the requirements of the Fair Credit Reporting Act which regulates when and how credit information can be used in the employment screening process. These laws restrict the use of credit unless there is a basis for the use of credit history information tied to the position for which a job applicant has applied.

An Illinois appeals panel of three judges recently overruled a lower court’s decision about the use of credit reports for employment screening. In a 2012 case against Neiman Marcus, a job applicant alleged the retail store discriminated against her when they ran a credit check for a sales position for which she had applied. When the applicant did not get the position based on the results of the credit check, the applicant argued that Neiman Marcus violated Illinois’s Employment Credit Privacy Act (ECPA). The 2011 regulation prohibits employers from inquiring about or using an employee’s or prospective employee’s credit history as a basis for employment.

There are exemptions to the rule which include the banking and financial industry or law enforcement positions. The law also states where a “bona fide occupational requirement” for a particular position exists, then the employer would be exempt from the law’s requirements. Neiman Marcus argued they were exempt from the ECPA due to access to cash and signatory power because the sales associate would have access to a customer’s credit information when applying for a store credit card. A lower court agreed that Neiman Marcus did act appropriately when it ran the credit check, but after an appeals process, the Illinois Court of Appeals overturned that ruling, agreeing with the applicant’s complaint. The three judge appeals panel remanded the case back down to a lower court for further review.

Credit Report Compliance

Before ordering a credit check for an applicant, employers should question if it is really necessary for the job. A credit check report is only recommended in cases where the employee will have direct access to cash, check-writing or other assets or for senior level positions that carry financial responsibility. If you are in a state which restricts the use of credit for employment screening purposes and you request credit history from your background screening vendor, you have to be aware of not only state restrictions, but local restrictions as well.

You can find insights and critical information on the most common types of background checks, compliance tips and verification processes in our eBook, Background Screening 101 by downloading it here.