An Ontario man rejected from a job over his credit report calls the widespread hiring practice “morally unjust” and verging on discrimination.
“I have no criminal record, no history to suggest I am a bad person, just a credit score reflective of poor economic times,” he said.
The man spoke to The Huffington Post Canada after he was given a conditional offer from TD Insurance Meloche Monnex for a job as an insurance advisor. Starting salary was set at $52,000 a year — the best offer he has received after holding several jobs at other big-name insurance companies. He did not want to be identified in this story for fear it would hurt his ongoing search for a job in the insurance industry.
The offer was conditional, however, on the results of a criminal and credit check. So he signed forms authorizing the probe into his financial past. He says that two weeks later, TD called to retract the offer based on what it viewed as unfavourable credit.
Out of work since August, he has fallen behind on some bill payments. He has a mortgage and a car loan, plus an estimated $14,000 in other debt. The Toronto area man says he was penalized for being “out of work for awhile.”
“They rejected me solely based on whatever my credit check came back as,” he said. “It just seems absurd to me.”
In documents acquired by HuffPost Canada, the bank emailed an offer of employment on Nov. 12.
“This offer is conditional upon the company receiving satisfactory references and background verification (credit/criminal),” read the letter.
That procedural check is fixed into the company’s hiring procedure, TD confirmed.
He was referred to the position by a friend last year. The 39-year-old said he contacted a TD hiring manager seeking clarity on what happened.
“He actually came out and flat out said everything else looks like I would have been a great asset to the team, it was just because they’re a financial institution and my credit score doesn’t meet their requirements.”
Since being turned down by TD, he has separated from his spouse and is living on the couch of family members. He is eager to find a job so he can get off that couch and no longer have to rely on EI to make ends meet. He said he is bothered by the fact that TD Bank has published studies raising the alarm on growing inequality between rich and poor in Canada, but weeds out job seekers in shaky financial standing.
“Although it’s technically legal, because there’s no law about it, it’s morally unjust,” he said. “In my opinion, it seems like discrimination…. It just doesn’t seem right.”
TD: No Compromise For ‘Best Candidate’
When someone borrows money or applies for credit for the first time, a credit file is created under their name. Files are managed by Equifax Canada and/or TransUnion Canada, two of the country’s major credit-reporting agencies.
These reports are regularly updated with bits of information sent by banks and other lenders; snippets of financial interactions documenting a history of payments and debts. They also detail habits, including whether someone tends to pay bills on time.
TransUnion stands firm on the use of its reports when determining a person’s employability.
“One study found a job applicant with a troubled financial history was almost twice as likely to engage in theft as an applicant who lacked any financial history issues,” company spokesperson Clifton O’Neal said in an email.
“The top two red-flag warnings present in these crimes were instances where the individual was living beyond his or her financial means or experiencing financial difficulties.”
The job applicant who spoke to HuffPost Canada said his credit report does not make him a thief.
“They’re basically convicting me of a crime that I’ve never committed,” the man told The Huffington Post Canada.
“Because they’re saying, ‘Well, we can’t hire you’ because they think I’m going to steal from them.”
Equifax, the country’s other major credit-reporting agency, also touts the value of credit checks.
“In this day and age, when we often can’t meet face to face, how do you determine someone’s character? We do it through looking at their past history and see how they’ve paid back debt,” Nadim Abdo, Equifax’s client solutions vice-president, said in 2013.
The financial industry helped pioneer the use of credit checks to screen employees. TD says every candidate given an employment offer is asked for consent for the bank to perform a “comprehensive” background check.
“The decision to hire or not hire an individual will depend on our findings, such as the nature of any particular factors, how long ago, whether it’s an isolated event, and the nature of role the person is being considered [for],” TD spokesperson Amy Tang said in an email.
“We need to consider each case within their particular circumstances to ensure that we get the best candidate without compromising our responsibility to our customers, employees and shareholders.”
It is company policy to not to discuss individual cases in the media, Tang said. “We are always happy to speak to the individual directly about their application if they want to reach out to us.”
A Practice On The Rise
The use of credit checks to screen potential employees has grown well beyond the financial industry in recent years. The federal government recently introduced mandatory credit checks as part of a new security screening procedure for public servants. The two main unions that represent federal employees have criticized the policy, calling it an unnecessary invasion of privacy and expressing concern that the policy could be applied in an arbitrary way.
The federal government defended the credit checks in a statement to CBC News.
"This practice is common in certain private industries [such as financial services] to indicate excessive indebtedness that may increase temptation to commit unethical acts," said Treasury Board spokeswoman Lisa Murphy.
Applicants to chains like Tim Hortons have also reported being asked to submit to a credit check. However in 2010, Mark’s Work Warehouse agreed to stop carrying out credit checks of job applicants following a complaint to Alberta’s privacy commissioner.
The retailer said credit checks helped assess the risk of in-store theft, but the province ruled the credit information wasn’t “reasonably required” to determine whether someone might steal from the store.
In testimony to Oregon legislators in 2010, a TransUnion official acknowledged that there is no evidence to support the notion that credit reports are reliable predictors of a prospective employee’s chance of stealing company money.
“At this point, we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud,” government relations director Eric Rosenberg said at the time.
In the United States, California, Connecticut, Hawaii, Illinois, Oregon, Vermont, and Washington have enacted measures limiting the use of credit reports when determining whether a person is the right fit for a job.
New York City recently announced that lawmakers are expected to pass a bill prohibiting employers from reviewing the credit histories of prospective workers.
Last year, a parliamentary committee pulled representatives from the country’s leading credit-reporting agencies into the same room to talk about the economic repercussions of identity theft and credit report data.
One witness went slightly off script, allowing that it is a bit contradictory when those who need jobs to improve their credit score are the ones being denied shots at better-paying jobs.
“There’s a certain irony that the people who are most vulnerable and who most require access to jobs could be discriminated against because they have have poor credit ratings,” said Murray Rowe Jr., president of Forrest Green, a Richmond Hill-based credit advisory group.
“I think it's important we understand that the ramifications of leveraging credit bureau data are quite profound,” he warned.
According to a New York-based think tank, the application of credit reports has moved far beyond their intended purpose.
“Credit reports were not designed as an employment screening tool,” public policy group Demos stated in a 2012 report. “Instead, they were developed as a means for lenders to evaluate whether a would-be borrower would be a good credit risk.”
But without explicit protection under Ontario’s Human Rights Code, claims alleging discrimination on the basis of economic status have no legal weight.
Calls For Change Missing In Canada
Dubbed “no hire” cases, they’re ones that are “tough to win,” according to Daniel Chodos, an employment lawyer with Whitten & Lublin.
“Because there could be any number of reasons why they didn’t select this person,” the Toronto-based lawyer said.
Under current legislation, TD and other employers are allowed to conduct credit checks, but only if they get permission from the candidate to do so. Chodos said it’s a common hiring practice in the finance industry, which makes its application to non-cash handling jobs harder to justify.
“If I’m working a fairly innocuous job where I’m never going to be dealing with money, why do you need to know if I ever declared bankruptcy?” he said.
Credit reports sometimes also list a person’s age. And if employers reject candidates based on that information or something else revealed in the report, that may be considered grounds for discrimination.
“If it comes out that there was nothing and it was just a veiled excuse to pick someone else and you’ve already acted out in reliance on it in some way, for example by quitting your current job, then maybe there’s something there,” Chodos said. “What the damages are is going to be questionable.”
Under the Consumer Reporting Act, job seekers have a right to find out an employer's reasons for denial within 60 days of being turned down.
Recruitment agencies say smaller companies are increasingly turning to credit reports as a way of avoiding “costly hiring mistakes” in a post-recession world.
“I haven’t seen a lot of calls for change in Canada,” said Chodos.
Some job applicants have taken to Internet forums and comment boards to share how they have been plucked out of candidate pools on the basis of their current financial standing.
I was offered a call centre job by TD Bank, but the offer was then revoked due to a bad credit entry from 6 years ago. My credit has been flawless since then and I also have a mortgage that is always paid on time, but that didn't make a difference to them. The recruitment officer told me to re-apply when the negative entry gets removed from my credit report in a few months.
- bobsacamano, redflagdeals.com
In times past, I might have agreed with the idea of a credit check on the assumption that those who manage their own finances wisely are more likely to be good employees. But not any more. Nowadays, I think they're worse than useless.
I know many, many people who ran successful businesses for decades, but who have been put out of business by the current recession, for which the lion's share of blame belongs to the criminals in the banking industry.
- LL, New York Times
I lost my job in 2009. The company went out of business. I was trying to keep things afloat with unemployment insurance, then things started going down. Looking for a job was on the slow side because of the economy. Unemployment ran out then the bills were not getting paid. Had a job interview and things looked good, until I didn’t hear from them. I called them to find out my credit was bad. How do you pay your bills if they will not hire you? I am depressed about the whole thing, but I am hopeful.
- janica, About.com
Have you been turned down from a job because of bad credit? Contact reporter Zi-Ann Lum to share your story.
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