Most Maryland businesses will no longer be allowed to consider potential employees’ credit reports when hiring because of a law that goes into effect Saturday.
The law bars most non-financial institutions from judging or eliminating job candidates due to poor credit histories or outstanding debt. It was passed this spring by General Assembly lawmakers who thought such a practice discriminates against applicants who have fallen on hard financial times.
“We feel very strongly that using one’s credit history is not a measure of their character,” said Sen. Catherine E. Pugh, a Baltimore Democrat who sponsored the Senate version of the bill. “It doesn’t make them any less capable of doing their jobs.”
Maryland is the fifth state to pass such a law, joining Hawaii, Illinois, Oregon and Washington.
California legislators passed a similar bill this month that is expected to be signed by the governor.
At least 11 states considered legislation to limit credit checks this year, according to Maryland legislative analysts, as increasing unemployment levels have brought the issue to the forefront.
Though supporters say credit checks punish applicants struggling with long-term unemployment or unforeseen expenses like divorce settlements and health costs, opponents argue the reports are a valuable tool in determining applicants’ levels of responsibility and trustworthiness.
They also contend that laws limiting the checks interfere with businesses’ ability to find the best candidates and unnecessarily put employers at risk for embezzlement and other financial crimes.
About 60 percent of organizations in the U.S. conduct credit checks on all or some job applicants, according to the Society for Human Resource Management.
“Credit reports are one tool that businesses use to determine if an employee is a good fit for their job,” said Will Burns, spokesman for the Maryland Chamber of Commerce, which opposed the state’s bill. “Navigating a hodgepodge of state laws is going to be a lot more difficult to follow than a federal standard.”
The law passed the Democrat-controlled Assembly by a mostly partisan vote, despite opposition from many state business leaders. Their concerns forced lawmakers to add exemptions for many finance-related industries and positions.
Banks, credit unions, investment firms and many other financial institutions will still be allowed to conduct credit checks, while other employers can request exemptions for positions which carry a “bona fide, substantially job-related reason,” such as for financial officers or payroll managers.
“We made a very clear distinction. We heard the voice of business,” said Delegate Kirill Reznik, a Montgomery Democrat who sponsored the House version of the bill. “We understand that there are certain positions where having good credit is a demonstrable requirement for the job.”
The law also bars applicable businesses from firing or disciplining current employees due to their credit histories. Employees or applicants who suspect a violation would be able to file a complaint with the state Commissioner of Labor and Industry, which would then investigate and potentially fine businesses as much as $500 for a first offense and $2,500 for additional offenses.
Patrick Donoho, president of the Maryland Retailers Association, said the allowances for financial institutions and job-related checks went a “substantial way” toward addressing concerns that led his organization to oppose the bill.
Still, Mr. Burns said he has concerns about the process involved in considering exemptions for non-financial businesses.
“Right now, our goal is just to make sure our members are informed about the law taking effect,” he said.
• David Hill can be reached at dhill@washingtontimes.com.
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