Financial Reputations

User big brother 1984

Big Brother, via Wikipedia

Americas have a continuing love/hate relationship with government.  On the one hand we hate to be told what to do, but on the other we like to have someone in a neutral corner to arbitrate disputes in the interest of “fairness”.  But, “fairness” is subjective.

A case in point is a wave of legislative activity in 25 states aimed at restricting credit reports in the hiring process, according to a USA Today report.  In effect what most of these bills would do is prohibit the use of credit histories in hiring.  Proponents allege that using them is unfair because some people have bad credit through no fault of their own, as when caused by a major accident or illness.  I will admit that I’m not sure what is right in this case, but my initial reaction is that it seems like a meat-cleaver approach to a subjective and complicated dilemma.

I would challenge anyone to argue that the ability to handle credit well is not an important criterion of employee reliability.  In fact I think it

would be wasteful and inefficient not to use such important information that has already been documented.

Day 4 - Paying off debt

Image by quaziefoto via Flickr

The article caused me to recall my parents’ attitude towards debt, a meme from the Great Depression.  If they didn’t have the money to buy something, they did without.  Debt was something to be avoided, almost shameful.  Society could do worse than to return to such an attitude.  If we enact law that dilutes the gravity of financial responsibility, what are we doing to society?

Further, if government is empowered to restrict information in this way, then where do we draw the line?  What other information might be denied to employers in the hiring process?  How about the applicant’s weight, or Body Mass Index?  How about physical attractiveness?  The quality of their clothes?  Should employers be required to hire without an interview, based on some government-approved application form?  Seems to me this is where the process could lead.  Fairness is a worthy goal, but I submit that massive bureaucracy is a poor way to try to achieve it, and this might be a case where the returns do not justify the red-tape.  In fact, the result might reward irresponsibility while increasing the size of government even more.

There is precedent for similar law, e.g., the Age Discrimination in Employment Act (ADEA) of 1967.  The ADEA is a force in the workplace, but not a strong one.  Violations are extremely difficult to prove, and have become even more so with time, as shown in a Newsweek article last year.  Such laws might be a source of business for the litigation industry, but it is my perception that laws that are hard to enforce are generally bad laws.  There is a fine line here and maybe I’m prejudiced, being somewhat vintage-challenged myself, but I think the ADEA is just on the desirable side of it.  It probably gives overzealous employers some pause when making personnel decisions.  Maybe.  But I wonder, how is government going to prevent employers from considering credit histories?  Are there are other reasons to access credit reports on applicants?  I don’t know.

There is already federal law on the books, the Fair Credit Reporting Act, which guarantees free access to credit-report information by anyone, including the means to correct any errors.  And a good job candidate will be able to explain her record if she gets an interview, but even if she doesn’t, an aggressive candidate can still put an explanation in a letter or resume’.

I have a bad feeling about restricting credit-report information.  Information-control runs counter to First Amendment philosophy.  I don’t think anyone would try to control employers’ right to access personal opinions of an applicant’s former co-workers, bosses or associates, for example.   It seems to me that ignoring credit histories in the hiring process is to ignore just as important an insight into character.

If any change to legislation on credit histories is needed, perhaps it should be to allow people to insert an explanation into their own report, not the restriction of all the financial information.  What do you think?

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About Jim Wheeler

U. S. Naval Academy, BS, Engineering, 1959; Naval line officer and submariner, 1959 -1981, Commander, USN; The George Washington U., MSA, Management Eng.; Aerospace Engineer, 1981-1999; Resident Gadfly, 1999 - present. Political affiliation: Independent, tending progressive as the GOP recedes from its Eisenhower roots.
This entry was posted in Culture, Government size, Personal Finance, Privacy and tagged , , , , , , , . Bookmark the permalink.

One Response to Financial Reputations

  1. I think let the market decide. That is if applicants find providing this information onorus, then the employer will get fewer applicants, and maybe have to pay more to attractive. If so the requirement will go away. It’ts not the state’s affair.

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