Four Firms Agree to Tell Job Seekers of Credit Checks

Amid growing controversy over the misuse of credit data, four employers--including McDonnell Douglas Corp. and R. H. Macy & Co.--agreed Wednesday to settle Federal Trade Commission charges accusing them of failing to inform applicants that they were denied jobs in part because of information in credit reports.

Experts said the increasingly common practice of using credit reports in hiring decisions raises questions about the abuse of individual privacy--particularly in a computer age--and the individual’s right to know about and challenge the accuracy of credit reports.

The FTC charged that the four companies--by failing to tell job applicants that such information was used to deny them employment--made it impossible for the job seekers to check the data for accuracy. The reports can contain financial data, conviction and arrest records, interviews with neighbors and descriptions of the general condition of homes in the applicant’s neighborhood.

The agreement requires the companies, which did not admit any wrongdoing, to provide the name and address of the relevant credit agency to any applicant denied employment since Jan. 1, 1990, because of information in a consumer report.

Besides McDonnell Douglas and Macy, the FTC issued consent decrees covering Keystone Carbon Co. of St. Marys, Penn., and the Kobacker Co., a footwear retailer based in Columbus, Ohio.

St. Louis-based McDonnell Douglas--which has 113,000 employees nationwide, including 50,000 in Southern California--said it would have to notify about 24 applicants. Pete Sloan, McDonnell spokesman, said the company complied “completely and voluntarily” with the FTC.

Macy said it was still counting the number of people affected. The New York-based firm declined to say how many people it employs nationwide. The company has five divisions: Macy’s Northeast, Macy’s Southeast, Bullock’s, Macy’s California and I. Magnin.

“We entered into the agreement willingly, since we have no argument with the law or its applicability, and to reaffirm our intention to comply fully with it,” Macy spokesman Michael Freitag said.

Freitag said Macy intends to continue using credit reports in hiring decisions when that is deemed appropriate. As a rule, he said, it does not make credit checks except when an applicant would be working in a “financially sensitive” area or if questions are raised in a routine case.

The Fair Credit Reporting Act, enforced by the FTC, requires companies to notify consumers and job applicants of the name and address of firms whose data they use to deny credit, insurance or employment. The law says consumers have free access to the information for 30 days.

Employers have come to rely more on credit reports in hiring decisions because use of other tools--including polygraph tests--has been restricted, said Bonnie Jansen, an FTC spokeswoman in Washington.

Harley Shaiken, a professor at UC San Diego, said credit reports do not accurately reflect a potential employee’s character. The use of such reports in hiring “could victimize many potential employees,” he said

David F. Linowes, a University of Illinois professor who served as chairman of the U.S. Privacy Protection Commission, said the practice of employers using consumer reports is fine--as long as the information they contain is valid.

The problem, he said, is that over half the reports contain errors. Major credit-reporting agencies have been subjected to heightened criticism in recent months about errors and misuse of their data.

“It is a justified concern that companies not use reports without verifying the accuracy with the individual concerned,” Linowes said.