It’s Time to Stop Employer Credit Checks

[ksen]

The argument is they do cause harm.

Try to keep up.

 

[Nice Squirrel]

No they will not be penalized by the marketplace, the problem is not self-correcting, and these companies are not worse off. Thinking these things do not make them true.

Then you're admitting they're right to do credit checks.

Credit checks cost money and remove people from the hiring pool. If they cause no harm that means they must be improving the quality of the hires.

You might reread what I wrote. I stated that the marketplace does not correct this behavior. I know for weirdos the unnecessary cost of $20 for a company presents a huge financial burden on a company, but we who live in reality know that any company that can stay in business can afford to make such trivial expenses. Therefore the "marketplace will not penalize" a company for "unnecessary" spending.

 

[Malintent]

Medical conditions are protected. Financial conditions are not.

If financial conditions are not protected then why do you have to sign a form allowing the company to perform a credit check? That sounds protected to me.

Credit reports are not only useful for determining the likelihood of paying back a loan. They are also useful for determining how reliable a person may be, and how much motivation they might have to steal from their employer.

(citation needed)

Would you hire a CFO that has personally filed for bankruptcy?

If he were a good CFO then sure. How he runs his personal finances is none of my business. How he has run the finances of the companies he has worked for is a much better indicator for how he'll run the finances of my company.

The distinguishing difference about protection is who is doing the protection... when I said "protected", I meant from the Department of Labor. Your financial information is also protected by the Federal government... but that has nothing to do with what we are talking about - the right not to hire.

No, a CFO that has filed bankruptcy cannot possibly be a good CFO candidate. That is just dumb. A publicly traded company that hires such a CFO will have their stock plummet and their CEO burned at the stake.

 

[ksen]

If financial conditions are not protected then why do you have to sign a form allowing the company to perform a credit check? That sounds protected to me.

Credit reports are not only useful for determining the likelihood of paying back a loan. They are also useful for determining how reliable a person may be, and how much motivation they might have to steal from their employer.

(citation needed)

Would you hire a CFO that has personally filed for bankruptcy?

If he were a good CFO then sure. How he runs his personal finances is none of my business. How he has run the finances of the companies he has worked for is a much better indicator for how he'll run the finances of my company.

The distinguishing difference about protection is who is doing the protection... when I said "protected", I meant from the Department of Labor.

So you were saying your medical information is protected from the Dept of Labor? That makes no sense given that we weren't talking about the Dept of Labor.

Your financial information is also protected by the Federal government... but that has nothing to do with what we are talking about - the right not to hire.

No, a CFO that has filed bankruptcy cannot possibly be a good CFO candidate. That is just dumb. A publicly traded company that hires such a CFO will have their stock plummet and their CEO burned at the stake.

You don't need a credit report to find out if a CFO candidate has filed for personal bankruptcy.

And as previously noted a credit report will most likely have medical information in it, which you said was protected info.

 

[Nice Squirrel]

No, a CFO that has filed bankruptcy cannot possibly be a good CFO candidate. That is just dumb. A publicly traded company that hires such a CFO will have their stock plummet and their CEO burned at the stake.

Not necessarily, there are many reasons for filing bankruptcy, but as pointed out a better record of bankruptcy comes from the court documents which will be requested as part of the firm doing the extensive background check on a CFO.

 

[Loren Pechtel]

No they will not be penalized by the marketplace, the problem is not self-correcting, and these companies are not worse off. Thinking these things do not make them true.

Then you're admitting they're right to do credit checks.

Credit checks cost money and remove people from the hiring pool. If they cause no harm that means they must be improving the quality of the hires.

The argument is they do cause harm.

Try to keep up.

No, you misunderstood. I'm saying that if the companies are not worse off (your argument!) for engaging in behavior that is demonstrably harmful to them (they cost money, they reduce the labor pool) then the behavior must also be beneficial--credit checks are improving the quality of hires.

 

[Ford]

No, a CFO that has filed bankruptcy cannot possibly be a good CFO candidate. That is just dumb. A publicly traded company that hires such a CFO will have their stock plummet and their CEO burned at the stake.

Not necessarily, there are many reasons for filing bankruptcy, but as pointed out a better record of bankruptcy comes from the court documents which will be requested as part of the firm doing the extensive background check on a CFO.

And correct me if I'm wrong here, but the topic at hand seems to be credit checks for hourly and salaried employees...not high level executives like a corporate CFO.

 

[Lumpenproletariat]

This form of discrimination should NOT be banned unless ALL OTHER forms of discrimination are banned.

Also, what about PREFERENCE for an applicant who has a good credit record? Should that be banned?

Yes, because unless I'm borrowing money from you it's none of your goddamn business what my credit report says.

Even if the applicant who has a good credit record wants the employer to know this information, so he can take advantage of the preference for a good credit record?

You would ban the employer from getting this information, and criminalize the applicant for trying to provide this information to the employer?

Why do you hate job applicants who have a good credit record? You can't stand the possibility that they might gain an advantage from having maintained a good credit record?

A company may not give preference to such a job-seeker?

They can have the preference all they want. That doesn't mean they should get access to my private financial information.

Nor should they be forced to hire you if you have a bad credit record or if you are too ashamed of your credit record to provide it to them. They should be free to draw whatever conclusion they wish from your bad record or from your being too ashamed to let them know your credit record. They have no obligation to hire you if there is something dubious in your background or you are hiding part of your background that you're ashamed of.

What if a company had a preference for people not susceptible to sickle-cell anemia, since that could cost them money in higher insurance premiums.

That's not connected with any pattern of behavior by the applicant or any pattern of questionable decision-making, such as making bad credit decisions. And the truth is that most chronic indebtedness is due to irresponsible decisions by the debtor, even if in some exceptional cases it is not.

Should companies be allowed to have access to your medical records too?

Should companies be allowed to know your age? An older worker is more likely to have health issues. So you would make it illegal for the company to know the AGE of a worker?

They do discriminate against older applicants precisely for this reason, as well as for other reasons.

As long as this kind of discrimination is allowed, then other forms of discrimination should also be allowed, so yes, they should know your medical history and be allowed to discriminate against you if you have chronic health problems.

If not, then you must also make it illegal for the employer to ask your age or to have your age in their records. And you must make it required that all workers wear a disguise so that they all look exactly alike, so that they all look the same age, and the same in every respect, so there can be no discrimination based on gender or skin tone or differences in dress style, etc.

Every difference is another basis for discrimination, so all differences between individual workers must be hidden so the employer cannot distinguish one worker from another.

The discriminations that already go on due to these differences in appearances are far more common than something like credit record checks. And they are more harmful.

E.g., discrimination against ugly people does far more harm than discrimination against applicants with a bad credit record. Bad credit is an indication of bad decision-making, in most cases, so there can be a net benefit from this discrimination, whereas the discrimination against ugly people is a net harm, since their negative appearance is never a result of bad decision-making.

 

[Lumpenproletariat]

USUALLY the debtor is to blame and default indicates bad character.

If so, those companies will be penalized by the marketplace, because bad practices that waste money make the company worse off. So the problem is self-correcting and thus there is no need for any law. There is no need for a law to force a company to do what is in its own interest. Those companies that do unnecessary practices are already being corrected by the marketplace and are losing money because of those practices.

No they will not be penalized by the marketplace, the problem is not self-correcting, and these companies are not worse off.

If a company's profit is lower, it is worse off. If it is wasting money, that reduces its profit. So it's impossible for a company to waste money and not make itself worse off. Higher profit = better off. Lower profit = worse off.

If you can't understand that, then you don't understand 2 + 2 = 4.

Thinking these things do not make them true.

No, these things being true makes anyone with half a brain think them. I think 2 + 2 = 4 because it is true. 2 + 2 does not equal 4 because I think it.

So we need no law prohibiting companies from using credit checks as a screening tool in hiring. If this is bad for business, those companies are already being punished by the market.

I'm not sure what reality you live in, but companies do things that are bad for business all the time and still make oodles of money.

But LESS oodles than if they did not do what's bad for business.

Their profit is lower. They make less if they do something wasteful. And they want to make more, not less. So they already have the incentive necessary to not to something wasteful.

The market does not punish.

So, no company was ever made worse by poor performance?

If you believe that, then you are opposed to antitrust law. You are opposed to competition, which is beneficial only because it rewards companies which serve consumers better and penalizes those which do worse at serving consumers.

It is amoral.

A competitive market makes consumers better off. This is all that matters. This is beyond morality. Making people better off is the whole point. Companies that serve consumers better are making people better off.

Those "studies" are pre-programmed to tell people what they want to hear. Employer-bashing is a fundamental principle served by such studies. Many people have bad credit reports, so there is a clamor for "studies" like this to "prove" that bad credit reports serve no purpose as a screening tool for hiring. Where there is a demand (for phony "studies" to give the rabble what they want), there will be a supply.

I would like evidence of this.

What you need first is proof that these "studies" are NOT phony. "Studies" which tell the rabble what they want to hear must first establish their integrity. If they don't first prove their integrity, we should disbelieve them, because it's obvious that their motivation is to pander to this large rabble mob who have a bad credit record and want someone to reassure them that it's not their fault and that "society" is to blame, and the ones who do these "studies" gain a benefit from telling this rabble what they want to hear.

I have done a lot of hiring and the credit reports tell me nothing about the candidate (especially if they have been poor or unemployed).

You're free to act on your impulse. But don't insist that everyone else must have the same impulses that you have. If you're right, then you'll profit from your good decision-making. It's not necessary for you to impose your perceptions onto others. In real life those who have the better perceptions and act on them will get good results. So you don't need to go around shoving your theories down the throats of others who have a different perception. If you're right, reality will prove it, without the need for you to bludgeon others into conformity to your perceptions.

Over the weekend I brought this up with other hiring managers and the unanimous reply was that they are worthless and anyone using them in a hiring decision doesn't know what they are talking about.

OK, and if you're right, then the market will reward you for your good decision-making. You don't have to force others into comformity to your beliefs. You'll hire good people and get better results and make more money. So what is the need to impose your beliefs onto others who see it differently?

(Remember these are usually included in a background check conducted by an outside firm.) So please, tell me what evidence do you have that these studies are phony?

When "studies" tell a large mob out there what they want to hear, we're entitled to be suspicious. You have not established the integrity of these "studies," so they are not to be trusted.

And meanwhile, if the credit checks are banned, other "minorities and poors" with good credit reports will be turned away from jobs who would have been favored by the use of credit reports in hiring.

Just because there is harm to this guy who was turned away in favor of that guy doesn't mean there is a net harm to society.

Actually the net harm to society is the lack of social mobility and the trapping of good people in a vicious cycle of debt.

Why is it not equally harmful to impede the social mobility of those good people who have a good credit record and would have been hired instead, because of the preference for them, but which will not be hired if you succeed in preventing companies from showing preference to them?

For every applicant who is rejected for having bad debt, another is hired instead who would not have been. Why is the social mobility of those who have bad debt to be preferred over the social mobility of those who have a good credit record?

And why do you presume that the one who was rejected must therefore go still deeper into debt? That makes no sense. That proves the point that the people you're talking about have a personal character defect, because only a defective person believes he should go deeper into debt as a result of having no income.

The opposite is the case: a person who has little or no income is precisely the one who should stay OUT of debt, because the likelihood of paying it back is less. So you prove the point that those deep in debt have a character flaw. If they were responsible, they would figure that out and be sure to stay out of debt if their future income potential is poor.

You can be a smart, hard-working individual who happens to be born poor and be barred from opportunities because of a lack of credit/poor credit.

Yes, but this is no excuse to run up debt that you cannot pay back. Anyone in this situation who then runs up debt is irresponsible and defective and is a bad prospect for an employer. Rather, the employer should give preference to the poor person who stays out of debt, despite the difficulties.

As pointed out over and over, a person's credit report is not indicative of behavior or performance on the job.

The employer should be free to decide this. If the applicant has a history of bad debt, it indicates a character flaw which the employer is entitled to take into account.

I have listed many scenarios where a person can have bad credit through no fault of their own (like being a victim of an accident, losing income and having to wait years for an insurance settlement).

In most cases the bad credit indicates a character flaw, even if it's not so in a minority of cases.

The solution to this discrepancy is not to give pity to everyone with a bad credit record, but rather, to stop promoting the debt culture. By showing sympathy toward all of them, including those who are to blame for their bad credit, we are further promoting the debt culture and the debt addiction which has gone out of control. Letting debtors instead suffer the consequences of their bad decisions, which is usually the case, will result in a change of attitude and a trend away from the excess debt in today's society.

Letting those who made mistakes suffer the consequences will lead to fewer mistakes in the long run.

Things like these should not bar a person from employment.

People are barred from employment by things much worse than this. By eliminating this as one of the bars from employment you are only giving greater priority to the other bars from employment which are worse than this one.

A net gain to society in using such credit checks is that it serves as a warning to people not to run up bad debt, because you never know how many ways it might come back to haunt you in the future.

No it doesn't. As pointed out over and over sometimes there is nothing you can do to avoid bad credit.

Usually there is plenty you can do. It's only rare cases where the debtor is not to blame.

I had a minimum wage job, was in an accident, unconscious and had surgery.

Really? You're one of the lucky ones! A lot of people can't get a minimum wage job, so when they get into an accident they get kicked out of the hospital in 24 hours.

I had no way to pay all the bills and although I made arrangements to pay most of them at $10/mo, the anesthesiologist demanded I pay $5000 up front. I let them know I could not get that kind of money in the time allotted and the bill went directly to collections. Bam! Bad credit. Not through any actions of myself.

Not a typical case. Usually the debtor is to blame.

And we have to take your word for it. You left out a lot of details.

In any case, usually chronic debt is due to a character flaw by the debtor, not something they had no control over. And further, you're lucky to be in a society that takes care of accident victims, and you were lucky to have a job. Your bad luck is no excuse to prevent others from making decisions based on holding people accountable and judging them by their past performance.

Profiling usually works, setting rules and numbers, following the usual indicators, setting eligibility requirements -- lots of lines are drawn, and it can be arbitrary. There's always a minority who get screwed. But that's no reason to throw out the rules and draw no lines. If you have a bad credit record, it's probably your fault, in most cases, and we get the best overall outcome by following the rules and judging in favor of those with a good record rather than hiding the record.

The rules are never totally "fair" to everyone.

It taught me nothing other than there is nothing that a credit report tells you about credit worthiness.

That's like an innocent person who gets falsely convicted saying that the whole criminal justice system is a hoax and should be abolished.

Usually the bad credit record is due to one's bad behavior, even if in some exceptional cases it is not.

There is no net gain for society because a good credit rating is a false goal.

It's a true goal and there is a net gain for society. Just like having courts and prisons is a net gain for society, even though a few innocent persons get screwed.

It's good for people to pay their debts on schedule. Debt default is bad for society. Credit rating is imperfect, like justice is imperfect, but it usually works and serves the purpose. We'd all be far worse off if there were no credit rating system for judging credit-worthiness. Despite the flaws in the system.

A good credit rating does not help you get ahead . . .

Yes it does. It usually helps to get a lender to prefer someone who is reliable, so it serves the purpose. Even if not always. Most of the approved loans end up being beneficial for society, especially if the requirements are strict. We'd all be worse off if we did not use the credit ratings for doing loan transactions.

. . . and a bad credit rating will get you more predatory lenders offering you credit.

No, you mean it will get you fewer legitimate credit offers. If you have a bad credit rating, then you should not be seeking loans from any lender. That bad rating is a warning to lenders to not make any offers, and anyone who is approached by unscrupulous lenders probably has a character flaw and needs to be counseled away from their debt addiction. It's that character flaw that the unscrupulous lenders are trying to take advantage of.

There are many analogies to other kinds of employment screening devices. Just for example, what about DISHONORABLE DISCHARGE from military service. Having this on your record makes it more difficult to get hired.

Yes, because a dishonorable discharge is usually tied to a specific behavior that you willingly participated in and is relevant. Much like court records.

Just as bad credit is USUALLY tied to specific bad behavior you participated in.

Whereas dishonorable discharge is sometimes not due to bad behavior. Or was not, such as during the Viet Nam war when some draftees resisted duty out of conscience. Even if they were wrong, it was an innocent mistake rather than a character flaw.

Also, what about PREFERENCE for an applicant who has a good credit record? Should that be banned? A company may not give preference to such a job-seeker?

As pointed out over and over again, it is a false preference much like a selecting for people who drink six quarts of water a day and it serves no effective purpose.

It does serve the intended purpose. All you've shown is that it's a bad indicator in some nontypical cases where the individual had no control. But that's the exception. In general the preference is legitimate, or is a legitimate judgment call by the employer who is taking a risk on the applicant and is entitled to check all possibilities.

I know of many criminals who have perfect credit. In fact the most effective criminals will have great credit.

An ex-con with bad credit is a greater risk to hire than one who has good credit. All else being equal.

 

[Nice Squirrel]

No they will not be penalized by the marketplace, the problem is not self-correcting, and these companies are not worse off.

If a company's profit is lower, it is worse off. If it is wasting money, that reduces its profit. So it's impossible for a company to waste money and not make itself worse off. Higher profit = better off. Lower profit = worse off.

If you can't understand that, then you don't understand 2 + 2 = 4.

Yes, $20 will noticeably hurt the bottom line of any non-lemonade themed business. And as we all know a $20 expense will have investors and customers fleeing in droves and the all powerful market will correct the problem. Much like when Phil from Accounting ordered expensive donuts at Exxon Mobile and investors and customers rose up in horror at the wasteful spending. It almost brought down the entire economy.

I am glad you are here to set us right.

The market does not punish.

So, no company was ever made worse by poor performance?

If you believe that, then you are opposed to antitrust law. You are opposed to competition, which is beneficial only because it rewards companies which serve consumers better and penalizes those which do worse at serving consumers.

Yes of course, these things follow naturally from what I said. Phil from accounting was a Stalinist. Those $20 donuts made Exxon Mobile unprofitable and thus consumers fled in droves, crippling the bottom line. Exxon was less profitable.

It is amoral.

A competitive market makes consumers better off. This is all that matters. This is beyond morality. Making people better off is the whole point. Companies that serve consumers better are making people better off.

You do know you are chanting a religious tenet here. Competition can make people better off, but so can cooperation. I won't debate you on this, because it is part of your religion.

Those "studies" are pre-programmed to tell people what they want to hear. Employer-bashing is a fundamental principle served by such studies. Many people have bad credit reports, so there is a clamor for "studies" like this to "prove" that bad credit reports serve no purpose as a screening tool for hiring. Where there is a demand (for phony "studies" to give the rabble what they want), there will be a supply.

I would like evidence of this.

What you need first is proof that these "studies" are NOT phony...

So you have no evidence.

I have done a lot of hiring and the credit reports tell me nothing about the candidate (especially if they have been poor or unemployed).

You're free to act on your impulse. But don't insist that everyone else must have the same impulses that you have. If you're right, then you'll profit from your good decision-making. It's not necessary for you to impose your perceptions onto others. In real life those who have the better perceptions and act on them will get good results. So you don't need to go around shoving your theories down the throats of others who have a different perception. If you're right, reality will prove it, without the need for you to bludgeon others into conformity to your perceptions.

It's not impulse, it is actual experience as a manager. Reality proves me right again and again. I speak from experience. And "bludgeon"? Really? Have you done hiring? Have you looked at other people's credit reports? Do you know what different reports tell you? From your answers I would guess "no".

Over the weekend I brought this up with other hiring managers and the unanimous reply was that they are worthless and anyone using them in a hiring decision doesn't know what they are talking about.

OK, and if you're right, then the market will reward you for your good decision-making. You don't have to force others into comformity to your beliefs. You'll hire good people and get better results and make more money. So what is the need to impose your beliefs onto others who see it differently?

Yes, I am oppressing others. You totally figured it out. First they came for the credit reports...

(Remember these are usually included in a background check conducted by an outside firm.) So please, tell me what evidence do you have that these studies are phony?

When "studies" tell a large mob out there what they want to hear, we're entitled to be suspicious. You have not established the integrity of these "studies," so they are not to be trusted.

You still have not provided evidence these studies are phony. I have provided real life experience. Bankruptcies will appear in the background checks. A CFO can take a organization through bankruptcy as part of their job. If you ever get to the board room, you might understand this.

And meanwhile, if the credit checks are banned, other "minorities and poors" with good credit reports will be turned away from jobs who would have been favored by the use of credit reports in hiring.

Just because there is harm to this guy who was turned away in favor of that guy doesn't mean there is a net harm to society.

Actually the net harm to society is the lack of social mobility and the trapping of good people in a vicious cycle of debt.

Why is it not equally harmful to impede the social mobility of those good people who have a good credit record and would have been hired instead, because of the preference for them, but which will not be hired if you succeed in preventing companies from showing preference to them?

You are not impeding them. They can stand on their knowledge, skills and experience rather on their socioeconomic status.

And why do you presume that the one who was rejected must therefore go still deeper into debt?

I didn't.

The opposite is the case: a person who has little or no income is precisely the one who should stay OUT of debt, because the likelihood of paying it back is less. So you prove the point that those deep in debt have a character flaw. If they were responsible, they would figure that out and be sure to stay out of debt if their future income potential is poor.

Are you still dependent on your parents? I have given many examples of how you can find yourself in debt and it is unrelated to character. Why don't you address these scenarios?

You can be a smart, hard-working individual who happens to be born poor and be barred from opportunities because of a lack of credit/poor credit.

Yes, but this is no excuse to run up debt that you cannot pay back. Anyone in this situation who then runs up debt is irresponsible and defective and is a bad prospect for an employer. Rather, the employer should give preference to the poor person who stays out of debt, despite the difficulties.

You seem to have very little real life experience. You seem to want to punish a person who hits hard times. People overcome and one of the ways they overcome is to get a better job with higher pay so they can pay off the debt. You also seem to be very ignorant of the ways people incur debt. Many successful people have had to go into debt and ruined their credit ratings to keep their businesses alive. I can think of two off the top of my head (and there are thousands more):

http://disney.com
www.ford.com

As pointed out over and over, a person's credit report is not indicative of behavior or performance on the job.

The employer should be free to decide this. If the applicant has a history of bad debt, it indicates a character flaw which the employer is entitled to take into account.

Please describe more of this "character flaw" and make sure you address my examples of of those people who get caught in low credit rating through no fault of their own.

I have listed many scenarios where a person can have bad credit through no fault of their own (like being a victim of an accident, losing income and having to wait years for an insurance settlement).

In most cases the bad credit indicates a character flaw, even if it's not so in a minority of cases.

So being an accident victim is a charter flaw? Nice. I'm glad you are not a hiring manager.

The solution to this discrepancy is not to give pity to everyone with a bad credit record, but rather, to stop promoting the debt culture. By showing sympathy toward all of them, including those who are to blame for their bad credit, we are further promoting the debt culture and the debt addiction which has gone out of control. Letting debtors instead suffer the consequences of their bad decisions, which is usually the case, will result in a change of attitude and a trend away from the excess debt in today's society.

Letting those who made mistakes suffer the consequences will lead to fewer mistakes in the long run.

Thank you Billy Sunday. Your hatred of debtors is noted. How do you feel about the money lenders such as Wells Fargo and Chase Bank?

Things like these should not bar a person from employment.

People are barred from employment by things much worse than this. By eliminating this as one of the bars from employment you are only giving greater priority to the other bars from employment which are worse than this one.

That is the point. To actually use information that is relevant rather than a third party report that tells an employer very little. I've previously posted a list of items that are more valuable to a hiring manager than a credit report. Do you have a problem with any of them? And can you tell me why a credit report is more valuable than these things?

I had a minimum wage job, was in an accident, unconscious and had surgery.

Really? You're one of the lucky ones! A lot of people can't get a minimum wage job, so when they get into an accident they get kicked out of the hospital in 24 hours.

I was discharged to hostel. So yes, I was kicked out of the hospital.

I had no way to pay all the bills and although I made arrangements to pay most of them at $10/mo, the anesthesiologist demanded I pay $5000 up front. I let them know I could not get that kind of money in the time allotted and the bill went directly to collections. Bam! Bad credit. Not through any actions of myself.

Not a typical case. Usually the debtor is to blame.

And we have to take your word for it. You left out a lot of details.

Yes I did. I did not include my medical records and results of my stool sample. I am sorry you live in a place where minimum wage jobs are difficult to get.

In any case, usually chronic debt is due to a character flaw by the debtor, not something they had no control over. And further, you're lucky to be in a society that takes care of accident victims, and you were lucky to have a job. Your bad luck is no excuse to prevent others from making decisions based on holding people accountable and judging them by their past performance.

The point is I still had bad credit, and if a credit report was key to landing a job, I would have been unemployed. And this was not due to a character flaw. Such things are way more common that you believe.

It taught me nothing other than there is nothing that a credit report tells you about credit worthiness.

That's like an innocent person who gets falsely convicted saying that the whole criminal justice system is a hoax and should be abolished.

Usually the bad credit record is due to one's bad behavior, even if in some exceptional cases it is not.

You have no evidence for this, but you keep stating it.

There is no net gain for society because a good credit rating is a false goal.

It's a true goal and there is a net gain for society. Just like having courts and prisons is a net gain for society, even though a few innocent persons get screwed.

It's good for people to pay their debts on schedule. Debt default is bad for society. Credit rating is imperfect, like justice is imperfect, but it usually works and serves the purpose. We'd all be far worse off if there were no credit rating system for judging credit-worthiness. Despite the flaws in the system.

Credit ratings tell you nothing about a candidate. This continues to be the point of this thread.

A good credit rating does not help you get ahead . . .

Yes it does. It usually helps to get a lender to prefer someone who is reliable, so it serves the purpose. Even if not always. Most of the approved loans end up being beneficial for society, especially if the requirements are strict. We'd all be worse off if we did not use the credit ratings for doing loan transactions.

Do you currently have loans or manage credit accounts? It doesn't sound like it. A credit rating only gets you a better rate. Bad credit will get you predatory lenders.

. . . and a bad credit rating will get you more predatory lenders offering you credit.

No, you mean it will get you fewer legitimate credit offers.

Predatory lenders are legitimate. Most title loan businesses are owned by the big banks like Wells Fargo.

If you have a bad credit rating, then you should not be seeking loans from any lender. That bad rating is a warning to lenders to not make any offers, and anyone who is approached by unscrupulous lenders probably has a character flaw and needs to be counseled away from their debt addiction. It's that character flaw that the unscrupulous lenders are trying to take advantage of.

Exactly, why buy a car to get you to a higher paying job in the suburbs? Why take out a loan to cover the expenses in between jobs, when you can beg for money on the exit ramp? This is all debt addiction.

There are many analogies to other kinds of employment screening devices. Just for example, what about DISHONORABLE DISCHARGE from military service. Having this on your record makes it more difficult to get hired.

Yes, because a dishonorable discharge is usually tied to a specific behavior that you willingly participated in and is relevant. Much like court records.

Just as bad credit is USUALLY tied to specific bad behavior you participated in.

Nope. Try again. You can take out debt as part of good behavior and follow all the rules and still find yourself in a finical bind through no fault of your own.

Also, what about PREFERENCE for an applicant who has a good credit record? Should that be banned? A company may not give preference to such a job-seeker?

As pointed out over and over again, it is a false preference much like a selecting for people who drink six quarts of water a day and it serves no effective purpose.

It does serve the intended purpose. All you've shown is that it's a bad indicator in some nontypical cases where the individual had no control. But that's the exception. In general the preference is legitimate, or is a legitimate judgment call by the employer who is taking a risk on the applicant and is entitled to check all possibilities.

You ave shown me nothing that says that falling into debt is an indicator of performance on the job.

I know of many criminals who have perfect credit. In fact the most effective criminals will have great credit.

An ex-con with bad credit is a greater risk to hire than one who has good credit. All else being equal.

I'll take that into account if I ever hire an ex-con and consider the credit report in my decision.

 

[Loren Pechtel]

It occurs to me that part of the problem could be solved by allowing judges to assign the credit dings in a divorce.

Yes, the debt is probably owed by both but the judge should be able to say that the credit bureaus can only report them on the responsible party.

 

[Lumpenproletariat]

If it helps the company serve consumers better by $.01 improved performance, then credit check is a legitimate screen for hiring.

Reality obviously isn't conforming to your expectations since: a) the science provided so far says credit checks for hiring aren't effective . . .

Correction: the pseudoscience, which most of this kind of "science" is.

. . . and b) companies do pay money to use this ineffective tool rather than the much cheaper trash can.

Wouldn't be the first time management put into place policies that cost the company more than necessary as well as being ineffective.

If so, those companies will be penalized by the marketplace, because bad practices that waste money make the company worse off. So the problem is self-correcting and thus there is no need for any law. There is no need for a law to force a company to do what is in its own interest. Those companies that do unnecessary practices are already being corrected by the marketplace and are losing money because of those practices.

So we need no law prohibiting companies from using credit checks as a screening tool in hiring. If this is bad for business, those companies are already being punished by the market.

Believing it doesn't work and it not working is also not the same thing.

I know. Which is why I've been posting links to studies that back up with evidence what I've been arguing. And your side . . . hasn't.

Those "studies" are pre-programmed to tell people what they want to hear. Employer-bashing is a fundamental principle served by such studies. Many people have bad credit reports, so there is a clamor for "studies" like this to "prove" that bad credit reports serve no purpose as a screening tool for hiring. Where there is a demand (for phony "studies" to give the rabble what they want), there will be a supply.

I would like evidence of this. I have done a lot of hiring and the credit reports tell me nothing about the candidate (especially if they have been poor or unemployed). Over the weekend I brought this up with other hiring managers and the unanimous reply was that they are worthless and anyone using them in a hiring decision doesn't know what they are talking about. (Remember these are usually included in a background check conducted by an outside firm.) So please, tell me what evidence do you have that these studies are phony?

You have to provide the evidence that the "studies" are scientific and not phony.

I'm not sure what reality you live in, but companies do things that are bad for business all the time and still make oodles of money.

The more bad things they do the less oodles of money they make. They want to make more oodles, not less. The market penalizes them for their mistakes by reducing their profit -- like from many many oodles to only many oodles -- which then corrects the behavior of those companies which pay attention to their performance. The ones which pay no attention are penalized with greater reduction of their profit than if they paid attention. So the problem you're claiming exists is self-correcting. Which doesn't mean companies will ever perform perfectly -- just that this problem, such as it is, is taking care of itself.

The market does not punish. It is amoral.

A competitive market makes consumers better off. This is all that matters. This is beyond morality. Making people better off is the whole point. Companies that serve consumers better are making people better off.

You do know you are chanting a religious tenet here.

So antitrust laws are based on religion or faith? These laws are based on the premise that competition between rival producers is beneficial to consumers.

The benefit of competition is recognized in economics and is not a religious belief. Any more than the law of inertia is a religious belief in physics.

Competition can make people better off, but so can cooperation.

And the use of credit records in hiring is a part of the competition -- those companies that use this screening device effectively will compete better, which is good for them and for the economy.

I won't debate you on this, because it is part of your religion.

It's your religion also because you're saying that competition makes people better off, meaning that the market does work to serve consumers, because it rewards the better performers and penalizes the worse ones. So you were wrong when you said the "market does not punish." It rewards and penalizes producers for good and bad performance -- not about morality, but about making consumers better off, which is economics.

Those "studies" are pre-programmed to tell people what they want to hear. Employer-bashing is a fundamental principle served by such studies. Many people have bad credit reports, so there is a clamor for "studies" like this to "prove" that bad credit reports serve no purpose as a screening tool for hiring. Where there is a demand (for phony "studies" to give the rabble what they want), there will be a supply.

I would like evidence of this.

What you need first is proof that these "studies" are NOT phony...

So you have no evidence.

You have no evidence to prove that credit records are never beneficial as a guide to hiring. The burden of proof is on you to prove that the "studies" prove this and are not just pandering to a mob of rabble who have bad credit and don't want to be adversely judged for their past bad decisions that resulted in that bad credit record.

There's every reason to believe that the authors of those "studies" are only pandering. Unless you can prove otherwise, that is the best conclusion to draw.

Those who want to interfere with private business decisions and impose their theories onto business decision-makers, using the power of the state to hammer them into compliance with their ideological theories, need to do more than just cite "studies" to prove they're right, but must prove beyond a reasonable doubt that those "studies" are scientific and are not driven by an instinct to pander to this loud screaming mob of activists who have a bad credit record and don't want to be held accountable for their past behavior in amassing that bad debt.

I have done a lot of hiring and the credit reports tell me nothing about the candidate (especially if they have been poor or unemployed).

You're free to act on your impulse. But don't insist that everyone else must have the same impulses that you have. If you're right, then you'll profit from your good decision-making. It's not necessary for you to impose your perceptions onto others. In real life those who have the better perceptions and act on them will get good results. So you don't need to go around shoving your theories down the throats of others who have a different perception. If you're right, reality will prove it, without the need for you to bludgeon others into conformity to your perceptions.

It's not impulse, it is actual experience as a manager.

Then apply what you've learned to only your own business and don't pretend that you have divined some universal law of business that must be imposed onto all other businesses, unless you claim to have Omniscience and know the micro-operations of every kind of business that can exist.

Reality proves me right again and again. I speak from experience.

If you really are right, then you can persuade other companies to apply what you know to themselves. No law is needed to make them comply, because they already have every incentive to make use of your experience to apply your practical lessons in their own hiring practices. Society is not obligated to submit to your rules which you claim are based on your "experience."

And "bludgeon"? Really?

Did I misspeak? You do NOT want to impose any law to prohibit companies from using credit records for screening job applicants?

I thought this was about using the law to prohibit companies from doing this practice.

Using the law to impose your will onto others, to overrule their private decisions and make them do what you want, is the meaning of "bludgeon" = force, threatening the use of legal sanctions, fines, penalties, subjecting them to lawsuits where they have to pay damages, etc.

(And the "bludgeon" is sometimes appropriate, like to protect the environment, prevent fraud, etc.)

If that's not what you propose, then change "bludgeon" to "persuade them to voluntary compliance."

Over the weekend I brought this up with other hiring managers and the unanimous reply was that they are worthless and anyone using them in a hiring decision doesn't know what they are talking about.

OK, and if you're right, then the market will reward you for your good decision-making. You don't have to force others into conformity to your beliefs. You'll hire good people and get better results and make more money. So what is the need to impose your beliefs onto others who see it differently?

Yes, I am oppressing others. You totally figured it out. First they came for the credit reports....

So then you do not want the state to intervene in this and prohibit the use of credit reports for judging job applicants. You think the practice should end, but not that the state should interfere in it.

Then we have no argument. Voluntary persuasion is a legitimate way to promote your theories on how business should operate. If you're right, then in most cases those companies will change and adopt your recommendations.

(Remember these are usually included in a background check conducted by an outside firm.) So please, tell me what evidence do you have that these studies are phony?

When "studies" tell a large mob out there what they want to hear, we're entitled to be suspicious. You have not established the integrity of these "studies," so they are not to be trusted.

You still have not provided evidence these studies are phony.

There are many "studies" which are promoted only by an ideological camp which is propagandizing for their ideology rather than what's good for society.

The burden of proof is on the advocate for the "studies" to prove that they are not ideologically-based. We have too many examples of "studies" that are ideologically-based and driven by the fanaticism of their ideological bias. So the obligation is on you to show that the "studies" are not in this category.

If the "studies" seem to be telling a particular interest group what they want to hear, especially a very large group, like all those who have a bad credit record, then we're entitled to the evidence that it is not ideologically-driven and is not pandering to that interest group.

Without that evidence, we're entitled to assume the "studies" are just pandering and are ideologically-driven.

I have provided real life experience.

Your personal experience has some limited value. But don't extrapolate from this to presuming that all such screening of job applicants should be banned by law. You're entitled to use what you've learned in your own decisions, and to make recommendations to others in business. But not to get laws passed dictating to other businesses how they should operate. You have not provided anything to show your competency to impose such a thing onto others.

Bankruptcies will appear in the background checks. A CFO can take an organization through bankruptcy as part of their job. If you ever get to the board room, you might understand this.

A company hiring someone might legitimately judge that a bankruptcy is a negative factor in an applicant's background and might use that as one of many screening devices in the hiring decision. You have provided nothing to show that such a hiring practice is bad for society and should be banned. Even if it's a poor indicator for most cases, it might be appropriate for some companies.

You cannot extrapolate from your personal experience to apply a universal law to all companies in all situations. Each individual company or business owner is in the best position to make that judgment. They might appreciate your recommendation on it. But your judgment cannot be made binding on them.

And in at least one of those links I've provided it demonstrates that using credit reports to winnow out potential job candidates has resulted in great harm to the people that have been turned away from jobs, i.e. minorities and poors.

And meanwhile, if the credit checks are banned, other "minorities and poors" with good credit reports will be turned away from jobs who would have been favored by the use of credit reports in hiring.

Just because there is harm to this guy who was turned away in favor of that guy doesn't mean there is a net harm to society.

Actually the net harm to society is the lack of social mobility and the trapping of good people in a vicious cycle of debt.

Why is it not equally harmful to impede the social mobility of those good people who have a good credit record and would have been hired instead, because of the preference for them, but which will not be hired if you succeed in preventing companies from showing preference to them?

You are not impeding them.

Yes you are, if a hiring screening device that would favor them (because it favors those with good credit record) is prohibited from being used to their benefit, and so they don't get hired when they otherwise would. How does that not impede them just as much as the screening device impedes the applicant who has a bad credit record?

They can stand on their knowledge, skills and experience rather on their socioeconomic status.

And they can also stand on their good credit record if the employer is using that as one screening device in its hiring practice. And the applicant with a bad credit record can stand on something other than this, if he has good points aside from his bad credit record, by which to be judged.

If he is rejected because of his bad credit record, he is no more being trapped or victimized by social immobility than the applicant with a good credit record is being victimized if he is unable to benefit by this because the employer is prohibited from giving preference to him for his good credit record.

There are many screening devices used by employers. The existence of these screening devices is not an assault on those who are screened, or an attack on their social mobility or a trapping them into a vicious cycle. The employer is entitled to use these screening devices and is not thereby inflicting an injustice onto those applicants who get screened out in the process.

Many are screened out for reasons more trivial than that of a bad credit record.

E.g., their bad looks, unfamiliarity with tricky interview questions, non-connection to people with influence, their gender, their age, their non-charisma, dull personality, etc. There's much worse screening devices than credit record checks that job applicants could whine about.

I have given many examples of how you can find yourself in debt and it is unrelated to character. Why don't you address these scenarios?

Those scenarios are the exception -- they don't negate the general rule that bad credit is an indication of bad character or poor judgment.

Again, "in debt" does not mean bad credit record. What is related to character is BAD debt, or DEFAULT. A bad credit record usually does mean a character flaw, even if in some cases it does not. The employer is entitled to use this information, because usually it does indicate something about the applicant's character, even if it's minor or in some cases means nothing. It's like profiling. It does work, if spread out over many cases, even if it turns up false results in some cases.

You can be a smart, hard-working individual who happens to be born poor and be barred from opportunities because of a lack of credit/poor credit.

Yes, but this is no excuse to run up debt that you cannot pay back. Anyone in this situation who then runs up debt is irresponsible and defective and is a bad prospect for an employer. Rather, the employer should give preference to the poor person who maintains a good credit record, despite the difficulties.

You seem to want to punish a person who hits hard times. People overcome and one of the ways they overcome is to get a better job with higher pay so they can pay off the debt.

That's no reason for the employer to be denied the choice of giving preference to an applicant with a good credit record. The company is not there to provide charity or forgiveness to someone who is down-and-out. Its function is to serve consumers. It has its own interest, and that of its customers, to protect. The company is entitled to do what's in its interest, without having to run any unnecessary risks, such as hiring someone with a possible defect out of pity for him.

You also seem to be very ignorant of the ways people incur debt. Many successful people have had to go into debt and ruined their credit ratings to keep their businesses alive. I can think of two off the top of my head (and there are thousands more):

http://disney.com
www.ford.com

This is not the concern of an employer deciding on an applicant.

In general, preference should be given to applicants who have NOT ruined their credit in order to keep their business alive. Those who find a way to get through WITHOUT ruining their credit are generally a superior type to those who ruined their credit.

The employer is entitled to make this judgment and give preference to applicants who have a good record rather than those who ruined their credit, even if it's true that in some cases the person made a good choice to run up that debt.

And the employer is not obligated to figure out if the applicant had a good reason to run up that debt. The one taking on debt has to understand the risk s/he is taking in making that choice. You take the risk, and you accept the consequences. Sometimes the risk pays off, and sometimes it does not.

It's not up to a company hiring to sort out all the reasons why the applicant did everything he or she did. The job application asks many questions which are arbitrary, and the applicant would like to be able to explain each one to the employer -- but the employer cannot go back into the detailed history of each applicant and have every fine point explained.

What if the applicant is a convicted child molester? Maybe there were circumstances which would explain this and make it less a reason for alarm, but it's not the employer's obligation to look exhaustively into every fine point to determine if there's a reasonable explanation and it should be dismissed. Rather, it's the applicant's obligation to maintain the best record possible.

As pointed out over and over, a person's credit report is not indicative of behavior or performance on the job.

The employer should be free to decide this. If the applicant has a history of bad debt, it indicates a character flaw which the employer is entitled to take into account.

Please describe more of this "character flaw" and make sure you address my examples of those people who get caught in low credit rating through no fault of their own.

They are the exception. In general it indicates a "character flaw" to have a bad credit record. Defaulting on debt is wrong. Usually this was bad behavior, misjudgment, even if in some exceptional cases it was not. The employer is entitled to use this as an indicator, along with many other screening devices, most of which are not perfect indicators of the applicant's character or fitness.

I have listed many scenarios where a person can have bad credit through no fault of their own (like being a victim of an accident, losing income and having to wait years for an insurance settlement).

In most cases the bad credit indicates a character flaw, even if it's not so in a minority of cases.

So being an accident victim is a character flaw?

Perhaps, in cases where the victim helped cause the accident, or, where there was no character flaw, that would be the exception, because most cases of bad credit are due to bad judgment by that person who incurred debt irresponsibly.

The solution to this discrepancy is not to give pity to everyone with a bad credit record, but rather, to stop promoting the debt culture. By showing sympathy toward all of them, including those who are to blame for their bad credit, we are further promoting the debt culture and the debt addiction which has gone out of control. Letting debtors instead suffer the consequences of their bad decisions, which is usually the case, will result in a change of attitude and a trend away from the excess debt in today's society.

Letting those who made mistakes suffer the consequences will lead to fewer mistakes in the long run.

Thank you Billy Sunday. Your hatred of debtors is noted.

So it's "hate" to say that people should pay back their debts and there should be consequences if they do not?

Things like these should not bar a person from employment.

People are barred from employment by things much worse than this. By eliminating this as one of the bars from employment you are only giving greater priority to the other bars from employment which are worse than this one.

That is the point. To actually use information that is relevant rather than a third party report that tells an employer very little.

If you're right, then explain that to employers who use credit reports and they will agree and stop doing that. No law is needed for this. The employer is most competent to make this judgment in each case, not the state.

In some cases, that credit record information is relevant, even if not in others.

I've previously posted a list of items that are more valuable to a hiring manager than a credit report. Do you have a problem with any of them? And can you tell me why a credit report is more valuable than these things?

The credit report is not the most valuable screening device, but also not the least valuable. The company that is hiring is in the best position to make that judgment. There are many screening devices that seem of little value. Less value than a credit report.

Some questions on a job application and put to the applicant in the interview seem to be only devices to conveniently eliminate a large number of them. Like the meat-axe --- KKKKKKCCCHHHHHUNCKKKKKK!!! "OK, that eliminates 2/3 of them, now we've got a manageable number to look at seriously."

In any case, usually chronic debt is due to a character flaw by the debtor, not something they had no control over. . . . Your bad luck is no excuse to prevent others from making decisions based on holding people accountable and judging them by their past performance.

The point is I still had bad credit, and if a credit report was key to landing a job, I would have been unemployed. And this was not due to a character flaw. Such things are way more common than you believe.

But usually bad credit is due to a character flaw, bad judgment. And there are other screening devices in employment that are worse that this.

It taught me nothing other than there is nothing that a credit report tells you about credit worthiness.

That's like an innocent person who gets falsely convicted saying that the whole criminal justice system is a hoax and should be abolished.

Usually the bad credit record is due to one's bad behavior, even if in some exceptional cases it is not.

You have no evidence for this, but you keep stating it.

I have no evidence that most convicted criminals were really guilty. There have been some false convictions. Maybe most or all of them are false. Maybe all prisoners should be released. I have no evidence that any of them are really guilty.

You'll have to provide the evidence that most bad credit reports are false.

There is no net gain for society because a good credit rating is a false goal.

It's a true goal and there is a net gain for society. Just like having courts and prisons is a net gain for society, even though a few innocent persons get screwed.

An imperfect system that favors some and penalizes others, with an overall better net result than if there were no system.

It's good for people to pay their debts on schedule. Debt default is bad for society. Credit rating is imperfect, like justice is imperfect, but it usually works and serves the purpose. We'd all be far worse off if there were no credit rating system for judging credit-worthiness. Despite the flaws in the system.

Credit ratings tell you nothing about a candidate.

In some cases bad debt does tell you something about a candidate.

But as long as you're willing to let the employer make that judgment, you're entitled to your opinion, and there's nothing wrong with you trying to persuade them to abandon this practice.

Though there are surely many other screening devices that are worse than this one.

. . . why buy a car to get you to a higher paying job in the suburbs? Why take out a loan to cover the expenses in between jobs, when you can beg for money on the exit ramp? This is all debt addiction.

You seem to be saying: Someone with bad credit can recover by going into still deeper debt, to buy a needed car, etc., to get hired and find a way back and to pay off the earlier debt. Yes. But is that what actually happens?

As long as this debtor has a true plan to climb back up, a real means to succeed in getting hired or to invest in something that will pay off -- then yes, maybe he will recover, and still further debt, initially, might be part of the recovery process. It might be the right decision.

But this is a risk, and if it bombs and this new debt ends up just driving him deeper still, with even less hope of recovering, any future employer is entitled to assume that this risk-taker job-seeker applicant has a character flaw. The decision to take on even further debt is entirely this borrower's responsibility, and he has to take the consequences if it falls through.

The prescription cannot always be: Oh, just take on still more debt, you just need some more "cash flow" to get the new plan going, so take out another predatory loan, and another and another if need be, and everything will finally click into place, and . . . etc.

At some point here a line is crossed where we're entitled to judge that this person has an addiction problem. And an employer is entitled to make this judgment, if the past record indicates such a repeated pattern of this.

There are many analogies to other kinds of employment screening devices. Just for example, what about DISHONORABLE DISCHARGE from military service. Having this on your record makes it more difficult to get hired.

Yes, because a dishonorable discharge is usually tied to a specific behavior that you willingly participated in and is relevant. Much like court records.

Just as bad credit is USUALLY tied to specific bad behavior you participated in.

Nope. Try again. You can take out debt as part of good behavior and follow all the rules and still find yourself in a financial bind through no fault of your own.

That's the exception. Usually the bad credit record indicates bad judgment, bad choices = fault of the borrower.

But further, what about preference in hiring for veterans? Isn't this really a discrimination against NON-veterans? Where is the evidence, where the "studies" or "data" showing that veterans are better performers than non-veterans?

Should companies be prohibited from giving preference to veterans unless they can cite "studies" proving that veterans perform better?

Employers are not obligated to provide "studies" in order to justify their screening devices. These are judgment calls they make, maybe sometimes based on "studies," but usually based on common sense or their instinct, perhaps derived from past experience, but seldom scientifically verifiable.

Also, what about PREFERENCE for an applicant who has a good credit record? Should that be banned? A company may not give preference to such a job-seeker?

As pointed out over and over again, it is a false preference much like a selecting for people who drink six quarts of water a day and it serves no effective purpose.

It does serve the intended purpose. All you've shown is that it's a bad indicator in some nontypical cases where the individual had no control. But that's the exception. In general the preference is legitimate, or is a legitimate judgment call by the employer who is taking a risk on the applicant and is entitled to check all possibilities.

You have shown me nothing that says that falling into debt is an indicator of performance on the job.

It's not just "falling into debt," it's defaulting on debt, missing payments. This is an indication of poor judgment, carelessness, irresponsibility. These are bad character traits which can lead to bad behavior in more ways than only that of handling one's finances.

An employer is entitled to consider this as an indication that the applicant might have character deficiencies that could affect his performance in the workplace. The company or employer who pays for this worker is in the best position to make that judgment.

a) the science provided so far says credit checks for hiring aren't effective . . .

Correction: the pseudoscience, which most of this kind of "science" is.

. . . and b) companies do pay money to use this ineffective tool rather than the much cheaper trash can.

Wouldn't be the first time management put into place policies that cost the company more than necessary as well as being ineffective.

If so, those companies will be penalized by the marketplace, because bad practices that waste money make the company worse off. So the problem is self-correcting and thus there is no need for any law. There is no need for a law to force a company to do what is in its own interest. Those companies that do unnecessary practices are already being corrected by the marketplace and are losing money because of those practices.

So we need no law prohibiting companies from using credit checks as a screening tool in hiring. If this is bad for business, those companies are already being punished by the market.

Then you're admitting they're right to do credit checks.

Credit checks cost money and remove people from the hiring pool. If they cause no harm that means they must be improving the quality of the hires.

You might reread what I wrote. I stated that the marketplace does not correct this behavior. I know for weirdos the unnecessary cost of $20 for a company presents a huge financial burden on a company, . . .

Every unnecessary financial "burden" on a company makes it worse off or reduces its profit, if only by a small fraction. Every company tries to eliminate even the small losses if possible. Every extra dollar saved does matter.

. . . but we who live in reality know that any company that can stay in business can afford to make such trivial expenses.

But just staying in business, or survival, is not all that matters. A company wants to drive its profit up as high as possible. The greed for higher profit will drive it to eliminate any unnecessary costs.

Therefore the "marketplace will not penalize" a company for "unnecessary" spending.

How is it not a penalty that its profit is reduced, even if by a small fraction?

No they will not be penalized by the marketplace, the problem is not self-correcting, and these companies are not worse off.

If a company's profit is lower, it is worse off. If it is wasting money, that reduces its profit. So it's impossible for a company to waste money and not make itself worse off. Higher profit = better off. Lower profit = worse off.

If you can't understand that, then you don't understand 2 + 2 = 4.

If a company's profit is lower, it is worse off. If it is wasting money, that reduces its profit. So it's impossible for a company to waste money and not make itself worse off. Higher profit = better off. Lower profit = worse off.

If you can't understand that, then you don't understand 2 + 2 = 4.

Yes, $20 will noticeably hurt the bottom line . . .

Even a $.01 loss hurts the bottom line by a tiny fraction, and this loss, by depriving companies of their screening device, is not offset by any net social gain. That an applicant with a bad credit record is replaced by another with a good credit record is not a net loss for society. If there's a possible $.01 gain to be realized, this is worth it because it's not offset by any net loss.

. . . as we all know a $20 expense will have investors and customers fleeing in droves and the all powerful market will correct the problem. Much like when Phil from Accounting ordered expensive donuts at Exxon Mobile and investors and customers rose up in horror at the wasteful spending. It almost brought down the entire economy. . . .

Yes of course, these things follow naturally from what I said. Phil from accounting was a Stalinist. Those $20 donuts made Exxon Mobile unprofitable and thus consumers fled in droves, crippling the bottom line. Exxon was less profitable.

Yeah nice try, but the real reason the economy crashed was Phil's roll in the Hostess Twinkie conspiracy to drive up the price of Yum-Yum donuts, which went stale when the Stalinist thugs ordered him to put the squeeze on bagel vendors. You need to get your facts straight.