Page 1 of 2 1 2
Thread Options
#1415493 - 07/15/10 05:54 PM Credit and Background Checks on Employees
wood2 Offline
New Poster
Joined: Apr 2010
Posts: 12
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.

Return to Top
Human Resources
#1415498 - 07/15/10 05:58 PM Re: Credit and Background Checks on Employees wood2
Dani York, CRCM Offline
Power Poster
Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
Originally Posted By: wood2
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.

Return to Top
#1415519 - 07/15/10 06:28 PM Re: Credit and Background Checks on Employees Dani York, CRCM
wood2 Offline
New Poster
Joined: Apr 2010
Posts: 12
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?

Return to Top
#1415572 - 07/15/10 06:58 PM Re: Credit and Background Checks on Employees wood2
Dani York, CRCM Offline
Power Poster
Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
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.

Return to Top
#1415597 - 07/15/10 07:15 PM Re: Credit and Background Checks on Employees Dani York, CRCM
wood2 Offline
New Poster
Joined: Apr 2010
Posts: 12
I have to triple check, but I am not aware of this type of lending practice.
Thank you.

Return to Top
#1415821 - 07/16/10 12:46 PM Re: Credit and Background Checks on Employees wood2
Bob The Banker Offline
Platinum Poster
Bob The Banker
Joined: May 2010
Posts: 958
I like those policies actually.

Return to Top
#1417572 - 07/20/10 08:04 PM Re: Credit and Background Checks on Employees Bob The Banker
Comply 101 Offline
Platinum Poster
Comply 101
Joined: Jul 2001
Posts: 708
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.
_________________________
CRCM CAMs

Return to Top
#1418087 - 07/21/10 06:03 PM Re: Credit and Background Checks on Employees Comply 101
Bob The Banker Offline
Platinum Poster
Bob The Banker
Joined: May 2010
Posts: 958
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.

Return to Top
#1418162 - 07/21/10 07:11 PM Re: Credit and Background Checks on Employees Bob The Banker
Aggs Offline
Diamond Poster
Aggs
Joined: Nov 2009
Posts: 1,331
Hoosier Country
Originally Posted By: Bob The Banker
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. frown
_________________________
CRCM + CAMS = certified compliance nerd

Opinions expressed in these threads are my own and not my employer's.

Return to Top
#1418189 - 07/21/10 07:48 PM Re: Credit and Background Checks on Employees Aggs
wood2 Offline
New Poster
Joined: Apr 2010
Posts: 12
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?

Return to Top
#1418306 - 07/21/10 09:44 PM Re: Credit and Background Checks on Employees wood2
GoneToTexas Offline
100 Club
Joined: Jul 2007
Posts: 130
Texas
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.

Return to Top
#1418372 - 07/22/10 12:13 PM Re: Credit and Background Checks on Employees GoneToTexas
Aggs Offline
Diamond Poster
Aggs
Joined: Nov 2009
Posts: 1,331
Hoosier Country
_________________________
CRCM + CAMS = certified compliance nerd

Opinions expressed in these threads are my own and not my employer's.

Return to Top
#1418493 - 07/22/10 02:29 PM Re: Credit and Background Checks on Employees Aggs
Midwest Banker Offline
Gold Star
Joined: Nov 2004
Posts: 349
Cheeseland
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.

Return to Top
#1418736 - 07/22/10 05:25 PM Re: Credit and Background Checks on Employees Midwest Banker
Bob The Banker Offline
Platinum Poster
Bob The Banker
Joined: May 2010
Posts: 958
Not every position in the bank deals with managing money -- there are alot of unrelated positions. Also, you have people that have charge-offs because of co-signing or joint credit where the other person was at fault. With unemployment the way it is, there are alot of people who may be unemployed or under-employed, thus affecting their credit.

Also, bankers are not managing people's funds. We are not brokers, we are not financial advisors -- we are bankers. We hold their funds and maintain them.

I just disagree with using a credit report to determine someones employability and your board seems to agree.
Last edited by Bob The Banker; 07/22/10 05:27 PM.
Return to Top
#1418948 - 07/22/10 08:16 PM Re: Credit and Background Checks on Employees Bob The Banker
80's Lady Offline
Gold Star
Joined: Apr 2007
Posts: 295
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!

Return to Top
#1419033 - 07/22/10 10:05 PM Re: Credit and Background Checks on Employees 80's Lady
Comply 101 Offline
Platinum Poster
Comply 101
Joined: Jul 2001
Posts: 708
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"
_________________________
CRCM CAMs

Return to Top
#1419101 - 07/23/10 12:28 PM Re: Credit and Background Checks on Employees 80's Lady
Bob The Banker Offline
Platinum Poster
Bob The Banker
Joined: May 2010
Posts: 958
Originally Posted By: 80's Lady
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.

Return to Top
#1419107 - 07/23/10 12:41 PM Re: Credit and Background Checks on Employees Bob The Banker
manylayers Offline
Gold Star
manylayers
Joined: Nov 2009
Posts: 263
PA
I believe that a background check is absolutely necessary and it should be continued during the term of employment. A good written policy needs to be put into place so that you are not determining on a case-by-case basis what's OK and what's not. This will vary from position to position, without a written documented policy, you run the risk of appearing to discriminate. However, this policy cannot be conviction=no employment. You will miss some fabulous candidates. If you have a guy that was convicted of something in his late teens/early 20's...he's now in his mid-40's...no new convictions, i would say lesson learned and he's probably a better candidate as a result. You've got a guy in his mid 40's in and out of the system....that's a different story.

As for credit....i'm in the middle. I think it can be a great way to verify past employment, addresses and that sort of thing...and give you a snapshot of this person...but credit reports contain all kinds of errors (we all know that)...and we all also know that people make mistakes...perfect credit does not mean perfect employee. Here also, you need a written policy that is your guide. And remember, you cannot discharge an employee for filing bankruptcy.

Return to Top
#1419294 - 07/23/10 03:38 PM Re: Credit and Background Checks on Employees manylayers
HRH Okie Banker Offline
Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
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.
_________________________
Just working here until I get my letter from Hogwarts.

Return to Top
#1419429 - 07/23/10 06:16 PM Re: Credit and Background Checks on Employees HRH Okie Banker
GoneToTexas Offline
100 Club
Joined: Jul 2007
Posts: 130
Texas
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.

Return to Top
#1426120 - 08/09/10 07:23 PM Re: Credit and Background Checks on Employees GoneToTexas
DerrickAuditor Offline
Member
Joined: Mar 2008
Posts: 91
USA
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.).

Return to Top
#1426162 - 08/09/10 08:03 PM Re: Credit and Background Checks on Employees DerrickAuditor
complylady Offline
Platinum Poster
complylady
Joined: Jul 2002
Posts: 614
Michigan
In this economy and with record unemployment, people who previously had perfect credit (and savings for a rainy day) and running into hard times. Not only are we seeing pay cuts and days without pay, but higher prices for gas, utilities, insurance premiums and food. People are having to take jobs with substantial decreases in pay - if they are lucky to find one at all. This has an impact on credit and credit scores. I don't know what the answer is, but recent credit history may no longer reflect the character of the person. And now the SAFE Act is going to require credit history, and with the downturn in the mortgage industry a lot of these people have probably been struggling to make ends meet and the credit bureau reports will probably reflect this. Should they not be able to get licensed, or should a banker who has been unemployed for a period of time be unable to obtain another job be penalized for derogatory credit bureau information? I would hope not.

Return to Top
#1426613 - 08/10/10 04:01 PM Re: Credit and Background Checks on Employees complylady
JacF Offline

Power Poster
Joined: Nov 2001
Posts: 6,719
PA
I see what you're sying about how current economic conditions impact the individual's credit history and score. If I see recent struggles because of a household losing half their income, etc. I do take the climate into consideration. But if I see problems that go back 3, 5, or more years- it's hard to play the "toough economy" card for those candidates.

Also, consider the other information contained in a credit report. Judgments, past employers, public records. This is information worth reviewing in any economy.

Return to Top
#1426679 - 08/10/10 05:09 PM Re: Credit and Background Checks on Employees JacF
Bob The Banker Offline
Platinum Poster
Bob The Banker
Joined: May 2010
Posts: 958
What if 7 years ago a person went through a divorce or a spousal death and has struggled to support their kids through the years, and moving up in jobs can make a big impact on their situation. But because of a credit report they may be denied the job that could lead the way to a better life. I just have a big problem with credit reports being used to hire individuals.

People typically seek work when they need money or more of it, and that may show in their credit report.

Return to Top
#1426687 - 08/10/10 05:14 PM Re: Credit and Background Checks on Employees Bob The Banker
Dani York, CRCM Offline
Power Poster
Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
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.

Return to Top
Page 1 of 2 1 2

Moderator:  Andy_Z, Gayla Sherry