The D.C. Council is considering a bill that would make it illegal for most employers to run credit checks on prospective employees. Employers have increasingly turned to credit checks as part of vetting potential new hires, saying that a poor credit history could reflect poor judgment. But privacy advocates say in many cases the checks delve too far into job applicants' personal information.

Positions that would be exempt from Councilman Graham's bill include:
> those requiring clearance for national security or from the FDIC;
> federal or local government jobs;
> supervisory, managerial, professional, or executive positions at financial institutions.

As credit scores have dropped during the bad economy, lawmakers have sought to protect job applicants. Bills similar to D.C.'s have been introduced in New Jersey, Oregon and in Congress.

"Many people are finding themselves caught in a Catch-22," said Ward 1 Councilman Jim Graham, who introduced the bill in D.C. "They lose their job because of the economic downturn and then they go into debt. A job would help them get out of debt, but if they're blocked from getting one by bad credit, then they end up in a never-ending spiral."

Graham's bill wouldn't apply to jobs that require clearance for national security or from the Federal Deposit Insurance Corporation. It also doesn't apply to supervisory, managerial or executive positions at financial institutions. But those job descriptions don't necessarily cover all the jobs where knowing someone's credit history could help employers prevent themselves

from becoming victims of fraud, said Manesh Rath, an employment lawyer at the D.C. law firm Keller and Heckman LLP.

"Employers look to use all the data they can legally obtain to make as thoughtful a hiring decision as they can," Rath said. "Among the risks they look for in prospective employees' credit histories is the risk of fraud or embezzlement."

That's not fair, said Paul Stephens, the director of policy and advocacy at the Privacy Rights Clearinghouse.

"There has not been any connection established between one's credit history and suitability for employment," Stephens said, adding that credit reports aren't always accurate. "Unless the employer can establish a nexus between a potential employee's credit history and the job he's applying for, running a credit check is going too far."

D.C. Chamber of Commerce President Barbara Lang said if the bill passes, some small businesses might no longer be able to run credit checks on applicants for jobs that involve handling large amounts of cash.

"The challenge we all recognize is the situation many people are in because of the recession," Lang said. "This is a good start, but we hope the councilman works with the business community going forward to prevent unintended consequences."