by Jessica Van Berkel, The Oregonian | Wednesday, June 30, 2010
When the recession forced Stacey Howard's painting business under, her credit history went down with it.
She narrowed her job hunt to companies that did not look at credit scores. "I self-selected out of a lot of jobs that I might have otherwise been qualified for... and when the economy is really bad that really limits your pool of potential employers," she said.
Howard has since found work, but staunchly supports a law that might have made her transition easier. It's one of six laws passed by the state Legislature that are set to take effect Thursday.
Under the new law, Oregon employers will no longer be able to use credit history as a factor in hiring, firing, demoting or suspending employees, unless they can establish that it's substantially related to the job.
The law originated from a concern that credit histories could be inaccurate or unfairly represent job seekers down on their luck, said Sen. Diane Rosenbaum, D-Portland,who sponsored the bill. Oregon unemployment is hovering around 10.6 percent, and people don't need another factor standing between them and a job, she said.
About 35 to 40 percent of employers nationally check credit scores, Bob Estabrook, a state Bureau of Labor and Industries spokesman, estimated. But the percentage is dropping as other states, including Washington and Hawaii, adopt similar laws.
When someone is unable to obtain a job because of a couple of missed rent payments, the credit evaluation is "arbitrary ... and people don't get a chance to explain," Estabrook said.
Using credit histories can also lead to inadvertent racial discrimination because African Americans and Latinos generally have lower credit scores, he said.
There are better tools employers can use to learn about prospective hires, like criminal history or drug tests, Rosenbaum said.
She said the most convincing testimony during hearings on the bill came from a credit agency representative who said there was no link between scores and job performance. Credit agencies are paid to check credit histories for employers and will lose business with the new law.
Law enforcement and financial agencies, including banks, will still be able to use credit scores as "proof of judgment," Rosenbaum said.
House Minority Leader Bruce Hanna, R- Roseburg, was confused when he heard that credit history would be considered an accurate representation of judgement for some jobs. The law imposes a double standard that is "simply foolish," he said.
The vote was divided near party lines with most House and Senate Republicans opposed.
Senate Minority Leader Ted Ferrioli, R-John Day, also voted against the law. Credit reports "may be more valuable than a degree, school transcript or letters of recommendation in deciding whether or not to hire an applicant and allow them to have access to inventory, company assets and company proprietary information," he said in an email. "The credit report might disclose a pattern of disputes with businesses, bad checks, broken promises and other issues that indicate the applicant would not be a good risk."
But Howard, who was hired by a community development corporation after an extensive job search, said there has been no research proving a link between job performance and credit score. "All it shows is that they had a financial hardship ... There's no correlation there."
"I just don't think it's a valid tool," she said, "I don't think it's fair to use it in any context."
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