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02-02-07, 04:53 PM #1
Credit checks: A civil-rights issue?
Credit checks: A civil-rights issue?
Studies haven't found a link between poor credit and job performance, but more employers are checking, and minorities are getting squeezed. Insurers are slammed for checking, too.
By Christian Science Monitor
Lisa Bailey worked for five months at Harvard University as a temp entering donations into a database. When the university made the job a salaried position, Bailey, who is black, saw a chance to lift herself out of dead-end jobs.
Bailey's superiors encouraged her to apply, she says, but turned her down after discovering her bad credit history.
Bailey, with her lawyer, has lodged a complaint against Harvard charging racial discrimination. The reason: Studies indicate that minorities are more likely to have bad credit, but credit problems have not been shown to negatively affect job performance.
Some privacy and minority advocates are now seeing credit as a civil-rights issue as minorities start to fight employers and insurers who base decisions on credit histories. Their effort could slow the near doubling in credit checks by employers in the past decade, which affects millions of Americans who are struggling with debt.
"It's definitely a civil-rights issue because of the growing use of credit reports and credit scores for hiring, renting an apartment, insurance and the fact that people of color have not been integrated into the credit-scoring system as much as traditional white middle-class America," says Evan Hendricks, the author of "Credit Scores & Credit Reports: How the System Really Works, What You Can Do."
In a 2004 study involving 2 million people, the Texas Department of Insurance said blacks had an average credit score roughly 10% to 35% worse than whites; Hispanics had scores 5% to 25% worse than whites.
Credit checks are a growing factor in hiring, with 35% of employers checking applicants' credit in 2003, up from 19% in 1996, according to the Society of Human Resource Management, an association for human-resource managers. Typically, credit reports are done if a person is going to deal with money, says John Dooney, a manager of strategic research for the association.
A case for considering credit
Employers should look at credit only for jobs in which the information is relevant, says Lester Rosen, the president of Employment Screening Resources, a national background-screening firm in California. He cites a few examples:
For jobs handling money, people may have a motive to steal if their debts surpass their salaries.
For jobs requiring travel, bad credit could bar applicants from renting cars or buying tickets.
For jobs managing money, a credit report can offer clues on how applicants manage their own.
Particularly in that last scenario, Rosen cautions employers to be circumspect because blemishes might be errors or beyond an applicant's control, such as sudden medical expenses. Legally, employers must receive written permission from applicants to do a credit check and must give those denied because of credit a chance to respond.
Rosen defends the careful consideration of credit in the hiring process. "If Harvard hired a person and did not use a credit report and the person embezzled, what would the headline be?" he asks.
So far, there's a lack of data supporting a relationship between bad credit and theft by employees. In perhaps the only study published on the subject, Jerry Palmer and Laura Koppes of Eastern Kentucky University in Richmond in 2003 found no correlation between employee credit reports and negative performance or termination for dishonesty.
Anti-discrimination laws bar hiring practices that disadvantage minorities, even inadvertently, unless a company can prove the practices are related to measuring a person's capability to do a job. Bailey's lawyer, Piper Hoffman, has taken on several cases in which companies used credit as a factor in the hiring process. In one 2004 case, she says, an employee's lawsuit against Johnson & Johnson resulted in a settlement that changed the way the company used credit in its hiring practices.
"In the larger picture, we're hoping to get Harvard and other employers to stop using credit as a criterion in hiring," Hoffman says.
Bailey lodged her complaint in November with the federal Equal Employment Opportunity Commission, or EEOC, which reviews all such cases before any lawsuits can be filed. Agency officials say there's anecdotal evidence these cases are on the rise.
"Employers seem to be assuming that somebody with a poor credit history is more likely to steal, and I don't think there's any kind of evidence that supports that," says Dianna Johnston, an assistant legal counsel with the EEOC. "To the extent that the employer has done an in-depth look and found other indices of dishonesty, they would be on more solid ground."
In a statement, Harvard notes that a "relatively small percentage" of jobs at the university require a credit check.
"The university conducts credit history reviews for employment purposes as required by credit card issuers, as well as to fulfill our fiduciary and data privacy responsibilities," the statement says. "Those responsibilities include protecting the private credit card data of our students, faculty, parents and alumni."
Bailey says that if Harvard was concerned she might steal, the university should have looked at criminal records instead. "I was a cashier for many years, and I've never been rich, and I've never stolen money," she says.
She ran into credit card debt she couldn't pay back when she spent some time unemployed. Harvard, she says, offered to reconsider if she could clear up her report in one week.
"The only way I can get it cleaned up in seven days is if I have money, so there was no way," Bailey says.
Catch-22 for poor people
Ernest Haffner, a legal adviser with the EEOC, notes that employers who screen for credit are setting up a Catch-22 for poor people: They need jobs to get good credit, but employers won't hire them because they don't have it.
The racial component to credit histories has been challenged in the insurance arena, too. The Texas Department of Insurance study found a relationship between credit scores and claims filed.
However, a class-action lawsuit against Allstate has just been settled, which resulted in the company changing the way they evaluate credit reports, says Wendy Harrison, a Phoenix lawyer who brought the case.
"What we've argued in our (insurance) cases is that you can adjust for (racial bias)," Harrison says, who has also handled cases of credit screening by employers.
Employers, however, are probably not relying on a number rating that can be adjusted because, according to Rosen, agencies give them only specialty reports that don't include a score. Harvard says their report had no score.
As for Bailey, she still wants the Harvard job and says there would be "no hard feelings." But first she wants to change the system for herself and others. "I hope I win. It might be beneficial to other people, too," she says.
This article was reported and written by Ben Arnoldy for The Christian Science Monitor.We are the thin blue line
and all the money in the world.
And no you can't have any.
02-02-07, 05:11 PM #2
Insurers charge the less-educated more
Seeking new ways to separate good risks from bad, car insurers zero in on your job. The result? It's not ditch-diggers and waitresses getting the discounts.
By MSN Money Staff
Your driving records might be identical, but if your neighbor has the right job and you've got the wrong one, you could pay hundreds of dollars more for car insurance.
The safe drivers, according to insurers? Biologists, chemists, economists, judges, veterinarians, accountants, architects, lawyers, teachers, engineers and dentists. The worst? Clerks, long-haul drivers and "unskilled and semi-skilled blue- and gray-collar workers."
In states where rating factors can legally include education and occupation, insurers such as Allstate and Geico are now charging drivers with the right kind of jobs much less for insurance.
Allstate discounts premiums by up to 10% for those in its favored jobs. Geico simply charges the less educated more.
Eric S. Poe, vice president of the nonprofit New Jersey Citizens United Reciprocal Exchange, suggests there is no correlation between education or occupation and the likelihood of an individual getting in an accident.
"The insurance industry is not concerned about whether you will have an accident or not," Poe said. "They are concerned as to whether you will want to be compensated for that accident."
Outcry in New Jersey
The Newark, N.J., Star-Ledger reported earlier this month that a 30-year-old single, male lawyer with a master's degree would pay $1,686 a year for coverage from Geico, but $2,880 if he were a janitor with a high school diploma. The newspaper quotes an internal Geico handbook: "Risks who have achieved at least a high school diploma or its equivalent are more favorable than those without a high school education. Bachelors, masters and other advanced degrees are considered most favorable."
"It is really unconscionable," Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action, told the newspaper. "I would love to know who they are marketing themselves to. Are they writing letters to doctors and lawyers? Everybody should be putting down that they are Rhodes scholars."
Occupation appears to be a factor in all states where Geico -- it's the country's fourth-largest auto insurer -- writes policies. New Jersey Consumers United Reciprocal Exchange used the company's online Web quote service to check rates in 43 states for a white-collar professional and a janitor with a high school diploma. The average difference in rates was 40%.
A lawmaker now has introduced a bill that would make New Jersey the first state to prevent insurers from using education to determine auto insurance rates, according to the National Conference of State Legislatures, which searched a database of statutes.
Ten states prohibit the use of driver income, said Miun Gleeson, spokeswoman for the National Association of Insurance Commissioners in Kansas City, Mo.
A break for some
Allstate's study, released last week, looked at 10 million insurance policies over a three-year period and broke down accident claims by profession. The winners, at least in Hawaii, South Carolina, Alaska, Alabama and Idaho, are editors, health technicians and judges, among others. A smaller discount goes to secretaries, teachers, locksmiths, carpenters and artists. Illinois, Minnesota and Wisconsin will offer the discount to police, firefighters and paramedics.
"It's a great example of how Allstate provides consumers with competitively priced insurance based on an individual's risks," said a spokesman for the No. 2 auto insurer, Mike Siemienas. He said that the company had filed to introduce the discounts in other states as well.
A 2004 study, done by Quality Planning Corp., matched Department of Motor Vehicle records with its own database of 14 million auto insurance policies to match incidents, drivers and occupations. It found the worst drivers -- students, medical doctors, attorneys, architects and real estate agents -- had twice as many accidents as the safest -- homemakers, politicians, pilots, firefighters and farmers.
State Farm, the largest car insurer in the country, doesn't use education or occupation to set rates, said spokesman Dick Luedke. The No. 3 insurer, Progressive, also refrains, said spokesman William Perry.
Slicing and dicing
Of course, one man's discount is another man's penalty. It's all part of the game as insurers burn up computing power trying to gauge risk of a claim to the nth degree.
Use of credit histories to determine premiums is the most highly publicized result, but some insurers now track odometer readings, for example, because people who drive less crash less. Progressive is testing a discount to those who agree to have a transmitter record how often, how fast and when their vehicle is driven, along with information about acceleration and braking. Progressive and others are looking at pay-per-mile programs as well.
Each company adopts its own rating system, although there are general guidelines that all companies follow. Your location, marital status, gender, age and the make and model of your vehicle are the most common factors in calculating your likelihood of a claim.
The national average bill for insurance in 2005 was about $930.We are the thin blue line
and all the money in the world.
And no you can't have any.
02-02-07, 10:36 PM #3
She "ran into credit card debt" like somebody runs into an old high school buddy at the grocery store. It clearly had nothing to do with her own irresponsibility. I can't imagine why they wouldn't hire her."I'm not a coward,
I've just never been tested
I'd like to think that if I was,
I would pass"
~Mighty Mighty Bosstones~
02-02-07, 11:38 PM #4
Well, from experience, divorce can screw up your credit record - especially if your ex does some hinky things with their credit cards. It somehow manages to roll downhill to the spouse.\\` ` ` ` < ` )___/\
`` ` ` ` (3--(____)
"...but to forget your duck, of course, means you're really screwed." - Gary Larson
02-02-07, 11:56 PM #5Banned
- Join Date
- NW Georgia
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If I owned a business and hired someone, whether he/she was black, red, yellow or white, to handle money, I would want to know if that person could manage his/her own finances before hiring. And, I wouldn't call it racial discrimination to do so.
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