The spread of the credit check as civil rights issue

Antidiscrimination laws bar a hiring practice that disadvantage minorities – even inadvertently – unless a company can prove it's 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," Ms. Hoffman says.

Bailey lodged her complaint in November with the Equal Employment Opportunity Commission (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, 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 noted 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," says the statement. "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," says Bailey.

Ernest Haffner, an attorney 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-based lawyer who brought the case.

"What we've argued in our [insurance] cases is that you can adjust for [racial bias]," Ms. 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, since, according to Rosen, agencies only give them 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.

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