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Democratic legislation to restrict Colorado employers from using consumer credit information in hiring decisions got initial approval Monday, although Republicans and business groups say the bill is bad for business.
More than a dozen states this year are considering similar legislation, with advocates saying the bad economy means more people who are unemployed have built up bad credit, and holding that against them creates a barrier to landing a job.
But opponents say businesses should be allowed to use all information available to them when making hiring decisions and the legislation opens them up to lawsuits by disgruntled applicants.
The proposal passed its first hurdle in committee Monday night with Republicans voting against it on a party-line vote. Republicans will be a bigger factor in deciding the fate of the legislation if it gets to the GOP-controlled House.
Democratic Sen. Morgan Carroll, the bill sponsor, said employers should base hiring decisions on work history and job interviews, not credit scores, in the aftermath of the recession.
"Do we want a permanently unemployed and unemployable class of people in this state?" Carroll, from Aurora, asked lawmakers on the committee voting on the bill.
Republican lawmakers are not sold on Carroll's idea and questioned whether it's the state's role to be involved in private hiring decisions.
"In a free market capitalist system, shouldn't it be the employer, not the state government, to decide what weight or a lack of weight to give one small aspect of the hiring process?" asked Mesa County Republican Sen. Steve King.
Carroll's bill would restrict the use of consumer credit information against potential employees unless they're applying for a job that involves financial decisions. It would also require employers who use credit information to give potential employees a chance to explain any negative information.
The legislation would allow people to pursue civil action if an employer unfairly used their credit information against them.
Tony Gagliardi, the Colorado and Wyoming state director for the National Federation of Independent Business, called the bill a government "overreach" that would discourage job creation.
"The bill exposes employers to lawsuits by employees or potential employees simply because they feel they might have been passed over for a promotion or employment," he said, adding that the legislation "does nothing but raise gray areas for an employer being able to justify their hiring decisions."
Carroll said the recession has made the legislation necessary.
"Do you know anyone who can lose a job, lose an income and keep a good credit score?" she asked.
Nineteen states and the District of Columbia have introduced legislation this year dealing with credit checks in employment, according to the National Conference of State Legislatures. Of 34 bills being considered, 32 deal with restrictions on the use of credit information for employment decisions.
Florida, Georgia, Massachusetts, New York and Wisconsin are among the states considering legislation.