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#1415493 - 07/15/10 05:54 PM
Credit and Background Checks on Employees
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New Poster
Joined: Apr 2010
Posts: 12
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I am looking for rebuttals on these two (non) practices.
1) The executive management team has deceided that we will no longer do a credit check on any employee, including new hires. Their reasons why not: * Strong operational checks and balances are in place in wire and cash management functions to prevent misuse of bank assets.
* Credit checks would not add in a demonstrable way to the aforementioned operational disciplines.
* Inconsistent reliance on credit checks may expose bank to unnecessary legal risk.
* Lack of evidence that credit checks contributed to any previous hiring decisions.
* Desire to utilize meaningful background practices.
2) No additional background checks will be performed on employees once hired. This includes people that are promoted or transferred into high risk areas of the Bank. Their reason why not: *The executive management team decided that our employees are promoted because they have done outstanding work and we know them well enough to know if they have any criminal issues. Therefore, no additional background checks will be conducted.
Please provide me your rebuttals and war stories. Needless to say, I do not think all of their reasons hold water.
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#1415498 - 07/15/10 05:58 PM
Re: Credit and Background Checks on Employees
wood2
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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2) No additional background checks will be performed on employees once hired. This includes people that are promoted or transferred into high risk areas of the Bank. Their reason why not: *The executive management team decided that our employees are promoted because they have done outstanding work and we know them well enough to know if they have any criminal issues. Therefore, no additional background checks will be conducted. What are they going to do about the SAFE Act requirements? For all existing employees, did they require fingerprints within the last 3 years and run background checks based on those?
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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#1415519 - 07/15/10 06:28 PM
Re: Credit and Background Checks on Employees
Dani York, CRCM
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New Poster
Joined: Apr 2010
Posts: 12
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Dani, Good questions. We do not do finger printing of employees-ever. As for the SAFE Act, we are a commercial real estate lender only, and I don't know if it applies to us. Do you?
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#1415572 - 07/15/10 06:58 PM
Re: Credit and Background Checks on Employees
wood2
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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That will depend. Do you ever make loans for the principle owners of your commercial clients secured by 1-4 family real estate?
Say Joe Smith (owner of your client ABC Company) wants to refi his mortgage, needs to consolidate debt, or wants to build a house, and wants to secure the loan with a house. You typically don't do that type of lending, but your bank makes an exception and does it this time. If your bank makes enough of those exeptions and any one of your loan officers makes more than 5 of these loans within a 12 month period, your institution would be covered by the SAFE Act.
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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#1415597 - 07/15/10 07:15 PM
Re: Credit and Background Checks on Employees
Dani York, CRCM
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New Poster
Joined: Apr 2010
Posts: 12
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I have to triple check, but I am not aware of this type of lending practice. Thank you.
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#1417572 - 07/20/10 08:04 PM
Re: Credit and Background Checks on Employees
Bob The Banker
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Platinum Poster
Joined: Jul 2001
Posts: 708
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I don't like them from a risk management point of view. You can't rely on "well we have never had a problem before". Maybe because I have worked at a prior bank where a long time trusted employee stole a six figure amount, knowing what their current financial situation is can lead to more monitoring of the employee. In many cases I have seen discussed over the years regarding employee fraud, if the bank had been more interested in knowing about some financial difficulty that an employee was going through, they might have either helped the employee or prevented a tragedy from occuring.
Any where I have worked, an employee would not have been hired with horrible credit. Any legal issues can be resolved by a good HR person.
If you are not sure, question your regulator. We typically see in the exam request letter something along the lines of "Give us a description of the employment screening process for hiring new employees". Their asking that for a reason.
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CRCM CAMs
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#1418162 - 07/21/10 07:11 PM
Re: Credit and Background Checks on Employees
Bob The Banker
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Diamond Poster
Joined: Nov 2009
Posts: 1,331
Hoosier Country
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Plenty of people with bad credit are great workers -- while alot of people with good credit are poor workers. it gives you no indication on what their workmanship will be like, yet you will use it to determine their hiring.
Background checks I like, credit checks I don't think have a place in the hiring environment. I agree. Especially in this economy. People, like my former coworkers, are out of work for months and months. Your credit will suffer for sure! Then you're lucky enough to land a job offer but they run your credit and decide not to hire you because your credit is bad?! I know it happens all the time, and it's awful. It's a vicious cycle.
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CRCM + CAMS = certified compliance nerd
Opinions expressed in these threads are my own and not my employer's.
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#1418189 - 07/21/10 07:48 PM
Re: Credit and Background Checks on Employees
Aggs
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New Poster
Joined: Apr 2010
Posts: 12
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Okay, I get the argument of good credit doesn't equal good workers, and I don't disagree with this position. However, what about the fact we are professional bankers and we have an obligation to manage money better then the average Joe. If you cannot manage your own funds, then can you manage others?
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#1418306 - 07/21/10 09:44 PM
Re: Credit and Background Checks on Employees
wood2
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100 Club
Joined: Jul 2007
Posts: 135
Texas
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I don't necessarily think one has to have "spotless" credit to work in a bank. But if I see one charged off credit card account after another, I would have to think long and hard about hiring that person. I'd have to wonder, is this a person who doesn't think twice about charging things they know they can never pay for? In my book, that's stealing, and if they are comfortable stealing from someone else, why would they not steal from me?
I'm FOR running the credit report, and then digging a little deeper before making a final decision.
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#1418493 - 07/22/10 02:29 PM
Re: Credit and Background Checks on Employees
Aggs
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Gold Star
Joined: Nov 2004
Posts: 349
Cheeseland
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In looking back over employees who had been dismissed (versus those who we did not dismiss) there were red flags in the credit history. Too bad they were ignored!
I am not concerned about a medical collection but what worries we is the excessive credit card debit and the numerous charge offs. I agree with Texas; we're bankers and should be expected to handle our money better than the average joe.
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#1418948 - 07/22/10 08:16 PM
Re: Credit and Background Checks on Employees
Bob The Banker
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Gold Star
Joined: Apr 2007
Posts: 295
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Yes, we hold their funds and maintain them - but we also have much greater access to those funds as well as personal information than some other non-banking related fields. Even the article Aggs referenced stated:
The laws would make it illegal for employers to access credit history unless they can show that it's relevant to a job's duties, such as handling money or having access to customers' financial information.
I think it just really boils down to what risk your individual institution is willing to take on given the type of business we are in.
_________________________
I use to think I was a smart cookie before I started working in Compliance. Now, I have mastered the art of the blank stare!
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#1419033 - 07/22/10 10:05 PM
Re: Credit and Background Checks on Employees
80's Lady
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Platinum Poster
Joined: Jul 2001
Posts: 708
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Wood2,
If you feel you have the fraud triangle covered-Pressure, Opportunity and Rationalization without pulling credit, you are probably ok. There are other means to monitor employees such as looking at their checking account, watching for excess gambling, random drug testing, etc. People have stolen money because of other close relatives financial difficulties that would never show up on their own credit report. Gambling problems and drug addictions are major contributors to the "pressure" that some employees feel and they believe there is no way out but to steal.
I agree, it is tricky with new employees and pulling credit in today's world. It not the indicator it was in the past. However, just to say that someone is qualified to promote and a long time employee and doesn't deserve watching in any way, that is too risky for my personal beliefs.
As Ronald Reagan said "Trust but verify"
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CRCM CAMs
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#1419101 - 07/23/10 12:28 PM
Re: Credit and Background Checks on Employees
80's Lady
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Platinum Poster
Joined: May 2010
Posts: 958
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Yes, we hold their funds and maintain them - but we also have much greater access to those funds as well as personal information than some other non-banking related fields. Even the article Aggs referenced stated:
The laws would make it illegal for employers to access credit history unless they can show that it's relevant to a job's duties, such as handling money or having access to customers' financial information.
I think it just really boils down to what risk your individual institution is willing to take on given the type of business we are in. I am not saying there isn't access to the money, however, it was stated how can you manage a customer's funds if you can't manage your own -- but the truth is, bankers don't manage their customer's funds.
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#1419294 - 07/23/10 03:38 PM
Re: Credit and Background Checks on Employees
manylayers
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Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
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I agree with so much of what is said here, both pros and cons. That being said - I see a credit report also as a background check. Some credit reports can show at a glance that the person is negligent and sloppy about credit.
These are the ones with half a dozen collections like $12 from the pizza place and $65 from a higher end restaurant. I look at those and think "this is someone I'm going to have to do extra training or babysitting to make them a valued employee".
Call me wrong, but there are plenty others out there that want the job who's credit shows more maturity or responsibility. Yes, you might miss out on a good one every now and then, but in this day and age we need all the help we can get in choosing the right person for the job.
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Just working here until I get my letter from Hogwarts.
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#1419429 - 07/23/10 06:16 PM
Re: Credit and Background Checks on Employees
HRH Okie Banker
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100 Club
Joined: Jul 2007
Posts: 135
Texas
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In addition, how would affect your bank's reputation to hire someone in any position who has chargeoffs all over town? When a business owner comes in for a loan, how is he going to react if his loan officer or admin asst left him holding the bag for some job he performed?
Like most anything in life, you need to look below the surface. If there is bad credit, you need to consider the reasons. You may choose to give the person a chance, and end up with a truly loyal and valuable employee. Or you may decide you need to run the other way as fast as you can.
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#1426120 - 08/09/10 07:23 PM
Re: Credit and Background Checks on Employees
GoneToTexas
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Member
Joined: Mar 2008
Posts: 91
USA
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We run credit at employment and any time you see red flags such as extreme gambling, multiple overdrafts, chargebacks from their own accounts at other financial institutions, etc.
Our policy is clear that good credit is a condition of employment, as well as, a condition of continued employment.
We also do not worry much about medical delinquencies or a few 30 day delinquencies - but beyond that, you are not considered for employment - or if an existing employee - you are subject to termination.
Sorry, but if you cannot manage your personal finances, I don't want you working where you have access to funds (physical cash in a drawer or vault, wires, paper GL tickets, electronic journal entries, loan proceeds, official checks, etc.).
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#1426687 - 08/10/10 05:14 PM
Re: Credit and Background Checks on Employees
Bob The Banker
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Power Poster
Joined: Apr 2005
Posts: 3,663
TN
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I think the point Jac and others are trying to make is that the actual report should be reviewed and mitigating circumstances be taken into consideration. i would liken it to reviewing a credit report for a loan. Strong credit underwriting doesn't just look at a score, it looks at what the actual report says, and dialogue with the subject of the report should ensue.
If I were to look at a report and see derogatory credit history, I would 1) see what kind of debt it is, 2) determine how old and bad it is, and 3) ask the person about it. Then weigh all the facts and the explanations, and make a risk based decision on whether or not this person is worth hiring. Does their experience outweigh the potential risk? Were their explanations reasonable? Do I believe them? etc.....
_________________________
I can't herd the cats anymore, so I just set up the electric fences and let them fry when they stray out of bounds.
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