Visa Inc.’s fiscal second-quarter profit jumped 33 percent from what the credit and debit card processor largely attributed to a rise in consumer debit card spending (“Visa 2Q Profit Jumps as Consumer Spending Rebounds,” The Houston Chronicle, April 28, 2010).

Visa debit card spending increased at home and abroad during the second quarter. In the United States, debit card transactions rose 19 percent while the average transaction value in dollars grew 18 percent. Visa fared even better in foreign markets where debit card transactions rose 20 percent while the average transaction value in dollars grew 33 percent.

As debit card spending increases, so do the fees merchants pay Visa to process those transactions. And because consumers continue to favor checking over credit as the preferred method of payment during the recession, the San Francisco company also forecast strong revenue growth of 11–15 percent for the full year, which would push revenue to between $7.67 billion and $7.95 billion.

Visa Chairman and CEO Joseph Saunders noted that his company’s earnings boost was fueled more by the upsurge in debit card transaction volume than average value, though he said the company is “increasingly optimistic that economic growth will gradually improve.”

Edward Jones analyst Andy Miedler agreed that Visa’s market share leadership in debit cards explained the company’s profit swell, adding the rise in debit card transaction volume is an example of how the recession has created a new frugality among consumers “[who] used to rely on credit [but who] are now learning the error of their ways and trying to stay on a budget.”

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State legislators across the country are joining a growing effort to remove credit checks from pre-employment screenings because they see them as obstacles for job seekers in a poor economy (“States Stepping Up to Limit Pre-Employment Credit Checks,” CreditCards.com, April 28, 2010).

Since 2007, Hawaii, Washington, and Oregon have enacted legislation that limits employers’ use of credit information as a factor in hiring decisions. And since the beginning of 2010, lawmakers from 18 other states and the District of Columbia have introduced similar legislation, according to the National Conference of State Legislatures.

In 2009, 60 percent of employers conducted credit checks during at least some pre-employment screenings, according to a survey conducted by the Society for Human Resource Management (SHRM). In such cases, prospective hires with negative items on their credit reports could be considered less desirable than those with good credit history.

“In today’s job market, the expectation is that employers can afford to be extremely selective about candidates. While credit might not be the most important factor in a hiring decision, bad credit can be a tipping point between one candidate and others competing for the job,” said Bob Schoenbaum, principal of Minneapolis-based executive recruiting firm KeyStone Search (“Credit Scores Can Affect Job Prospects,” Minneapolis-St. Paul Star Tribune, Jan. 11, 2010).

A 2008 report by the Association of Credit Fraud Examiners (ACFE) shows why Schoenbaum may be right. It found the two most common indicators of future fraud in potential employees were candidates living beyond their financial means and candidates experiencing financial difficulties.

“If someone has bad credit, that doesn’t mean they will commit fraud. But that person has a higher risk of committing fraud than someone with a spotless credit history — all other factors being equal,” says John Warren, AFCE vice president and general counsel.

Steven Katz, spokesman for the credit bureau TransUnion, said such data make credit screening as valuable to employers as “the personal interview, review of education history, resume, job skills, references, standardized testing and other information that they use as part of the pre-employment process,” especially when considering employees who would have access to funds and confidential information.

But not everyone agrees.

Rep. Matthew Lesser (D-CN), a leader in the fight to limit pre-employment credit checks who has twice proposed legislation to limit them, argues that good prospects are denied jobs as a result of such screenings. “This is an obnoxious practice that has been excluding a number of perfectly acceptable, perfectly qualified job applicants,” Lesser said.

Financial expert Sandy Shore, a senior counselor with consumer counseling agency Novadebt, said employers who rely too much on credit checks can hurt themselves too, by “missing out on some good employees.” She added, “I can tell you that I have spoken to many consumers who have bad credit and are very successful at their jobs.”

At the federal level, Rep. Steve Cohen (D-TN), a proponent of limited credit checks, introduced the Equal Employment for All Act (H.R. 3149) which would “amend the Fair Credit Reporting Act to prohibit the use of consumer credit checks against prospective and current employees for the purposes of making adverse employment decisions.” The bill was introduced in the U.S. House of Representatives on July 9, 2009, and has been stalled in committee ever since.

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