Briefly discuss how some states limit the use of credit histories in screening and why this does or doesn’t makes sense as a policy.

Question

What will be an ideal response?

Answer 1

Colorado’s “Employment Opportunity Act” (SB13-018) prohibits an employer’s use of consumer credit information for employment purposes if the information is unrelated to the job. Moreover, it requires an employer to disclose to an employee or applicant if the employer uses consumer credit information to take adverse action against her and the particular credit information upon which the employer relied. It also authorizes an aggrieved employee to sue for an injunction, damages, or both. The regulations in these States seem justified, given evidence that credit scores are related to several demographic variables that in many cases are unrelated to job performance.
The five predictors combined accounted for 34% of variance in credit scores and the predictors (a) minority status (minority status associated with lower scores), (b) educational attainment (less education associated with lower scores), and (c) age (younger applicants received lower scores) had the strongest effects. While educational attainment may be a job-related factor for some occupations and positions, the strong relation between ethnicity and credit scores guarantees that the use of this particular type of personal history data will result in adverse impact. In addition to legal issues, the use of credit score has ethical connotations. Specifically, “critics of credit scores contend that using such information to make hiring decisions unfairly disadvantages individuals with low scores and traps them in a ‘vicious downward spiral’ where unemployment damages personal credit which, in turn, can hurt their job prospects” (Bernerth, 2012, p. 245). The regulations in these States seem justified, given evidence that credit scores are related to several demographic variables that in many cases are unrelated to job performance.