States consider banning credit checks on job applicants

http://www.kansascity.com/2010/03/01/1782965/states-consider-banning-credit.html

 I chose this article because when I read the title, I said to myself, “Well THERE’S a terrible idea!”  Of course I was hoping that the title was misleading, but it wasn’t.

Under federal law, employers must get written permission to conduct a credit check on a prospective employee.  According to the article, 16 states are considering banning the practice outright.  According to a 2008 survey by the Association of Certified Fraud Examiners, workplace fraud cost the US $994 billion in 2008.  That is the operating budget of a country Western Europe.  It could be rounded up to $1 Trillion which would be the cost of the hotly debated Healthcare bill.

Many states are considering the ban because they feel that it is hard enough for people to get jobs in the current economy as it is and they feel that that employers use the credit checks to “trap people in debt” by using their credit history against them.

If only the state legislatures knew a few facts before they started debating whether to ban one of the most effective means of fraud detection available. 

First of all, while most companies do use credit checks, only about 13% use them on new hires.  The credit checks are actually used on current employees in order to detect fraud.  How do they detect fraud through a credit check?  They can usually catch the perpetrator when they are living well beyond their means for one answer.

Secondly, people volunteer for the credit checks, it’s not like they have guns to their heads.  And then there is the cognitive mistake that the legislatures are making.  Companies have a right to ask that their employees submit to credit checks as a means of protecting their assets and property.  Legislatures would put unnecessary risk on those assets which are private property by banning the credit checks.  Something that I don’t think they can really do, legally. 

Lastly, the legislatures seem to think that banning the checks will somehow get people back to work.  This won’t happen if workplace fraud increases and companies start losing money.  In fact the exact opposite would happen.  People would lose those jobs.  But legislators are worried about keeping their own jobs at the present moment, however a move like this would ironically end their stays in the legislature.

Somehow, these legislatures seem to believe that people have more of a right to a job than private entities have to their own property.  This puts private enterprise at serious risk.  Legislators must know their place and not put politically popular ideas ahead of sound financial and economic policy.  Banning the credit check will not create any more jobs than were there in the first place, but instead it will degrade the integrity of the companies who offer those jobs.  Legislators must think that it is perfectly acceptable to pass reckless legislation and appear to be creating jobs at the expense of entire companies.