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Philadelphia Law Makes Credit Report Screening Illegal

Checking a potential employee's credit has been under review in the screening process. Businesses in Philadelphia will no longer be able to abtain this information thanks to a new city ordinance.

What the Ordinance Says

According to The National Law Review, revisions of Chapter 9-1100 of The Philadelphia Code, the city's fair practice ordinance, state that aside from certain exemptions, companies cannot use someone's credit report when making an employment decision. That is, whether the credit information is conveyed verbally, in written format or otherwise, employers cannot use it to hire, fire, tenure, promote or take any other action that would affect an employee's status. The term "credit information" takes on a broad definition, and it encompasses anything from debt to a person's credit worthiness. Jim Kenney, the mayor of Philadelphia, signed the ordinance into law on June 7, 2016, marking the beginning of a new form of protection for new and potential hires.

As JD Supra Business Advisor explained, the new law comes with two exemptions. First, financial institutions, like banks or insurance companies, are not required to follow this protocol. After all, for these companies, credit information is used for more than just revealing information on an employee's character or behavior. Screening credit reports allows these organizations to review the individual's financial responsibility, and for financial institutions, this is a very important factor in determining whether a candidate is a suitable match for a job.

The second exemption is for City of Philadelphia employers, though this concession comes with certain stipulations. The job must involve managerial duties, financial responsibilities and access to confidential information. The position must also require the employee to be bonded under law. That said, should employers consider credit information in employment status decisions, they must provide a written statement of their reasoning and allow the individual in question to offer an explanation before a final verdict is made.

A Loss or Gain?

Mayor Kenney signed the ordinance into law in an effort to protect Philadelphia employees from having their credit histories affect their job opportunities. On the one hand, the mandate does just that. This is especially beneficial for people with tarnished records that are reflective of mistakes or difficult situations as opposed to financial competency.

In a 2012 survey, about 47 percent of companies include credit report checks in their standard screening practices, according to the Society for Human Resource Management. Data found that companies use this strategy to prevent theft and embezzlement. Citing reports from the Department of Justice, CBS noted that approximately one-third of employees steal from employers.

Consider OPENonline your go-to source for comprehensive employee screening solutions, including credit report checks. Visit our website for more information on how you can protect your company from theft and fraud.

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