How to Handle Financial Information about Job Applicants

By at 5 April, 2017, 6:08 pm

by Barbara Weltman-

Individuals with financial troubles can create problems in the workplace. They may be preoccupied with their personal woes and unable to concentrate on work. They may be tempted to steal from the company in an attempt to solve their own financial issues. But can you factor their personal financial situation into a hiring decision?


It’s not against federal law to find out about a job applicant’s financial information.

Pre-employment background checks can include a credit rating, bankruptcy or garnishment, past problems with bonding, ownership of a car or house, length of time at an address, and other financial matters.

Is this information relevant to the position you’re trying to fill? Are you using it to determine whether a person is responsible?  You can use such information to accurately determine whether the applicant will be a responsible and reliable employee. But there are serious reasons to tread cautiously.

Discriminatory practices

If you decide to inquire about financial matters, you must do so on a nondiscriminatory basis. For example, if you inquire about bankruptcy, you must ask all applicants, regardless of race, color, national origin, religion, sex, disability, age, or genetic information. Even with this in mind, because of the Americans with Disabilities Act, you may have to make exceptions to your policy for an applicant who is disabled.

Be aware that the Equal Employment Opportunity Commission (EEOC) can take action against an employer if financial information is used so that it has a “disparate impact” on protected classes. The EEOC must be able to produce statistical evidence that the employer’s practice of obtaining a credit check actually produced a disparate impact. In one case, an employer won because the evidence contained analytical fallacies.

In another case, the court said the EEOC brought a case on the basis of a “homemade methodology, crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”  Nonetheless, it’s clear that an employer can be exposed to litigation if the government even thinks that there may be a disparate impact and the company may be forced to settle rather than face the cost and uncertainty of litigation. Thus, it’s probably wise to make such inquiries only if financial information is essential to the position you’re filling, and not merely to assess a person’s general reliability.

Additional inquiries

If you plan to do a background check that includes financial information, you must conform to the Fair Credit Reporting Act (FCRA).

• You must certify that you comply with all federal and state equal opportunity laws in order for a consumer credit reporting agency to provide you with information.

• You must inform the applicant in writing that you will do a background check and how you’ll use the information (e.g., in a hiring decision). This must be “clear and conspicuous,” so use a separate document for this purpose; the credit reporting agency needs to see this disclosure.

• You must obtain written permission from the applicant to proceed.

If you decide not to hire the applicant, you must provide him/her with a copy of the credit report and a description of his/her rights under FCRA.


If you’re hiring someone who may have unsupervised access to company money, or will have signatory power on the company bank account, you may want to learn about the person’s financial information. If you decide to proceed here, comply with all federal law. Also, check on the laws in your state to learn what financial information you can obtain for a hiring decision; find information from Employment Screening Resources. If you have any questions, contact an employment law attorney.

Barbara Weltman is a member of SBE Council’s advisory board, and has been a premier consultant for small businesses of every kind for over twenty years. She’s the founder of Big Ideas for Small Business and has written numerous books on small business operations, including J.K. Lasser’s Small Business Taxes, The Complete Idiot’s Guide to Starting a Home-Based Business, and The Rational Guide to Building Small Business Credit. Follow Barbara on Twitter @BarbaraWeltman

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