OMB orders credit checks on new cardholders

By CHRIS GOSIER

Agencies must conduct credit checks on employees when issuing new government charge cards beginning Oct. 1 under a new policy.

The new rules, issued Aug. 9 by the Office of Management and Budget, are the latest effort to bolster the integrity of charge card programs, OMB Controller Linda Combs said.

"This new guidance will help ensure that federal charge cards aren't misused, that the government pays its charge card debts on time, and that government managers implement strategies for making smarter procurement decisions," she said in a statement.

Some employees have abused the cards by exceeding their spending limits, making unallowed purchases and splitting large purchases into several small amounts to avoid having to follow the more stringent procurement rules that apply to large purchases.

Beginning Oct. 1, agencies must assess the creditworthiness of employees applying for purchase or travel cards by finding out their credit scores, a formula-based number on a scale between 300 and 850.

The minimum credit score for getting a card is 500. Only 2 percent of Americans have credit scores lower than 500, according to Fair Isaac Corp., a California-based company that developed the credit score.

For those who don't surpass a credit score of 660 slightly more than a quarter of Americans fall in this category the agency must place some sort of restriction on the card. Those could include: lowering the card's credit limit, limiting the type of transactions allowed, limiting use at ATMs, or restricting the card's active period.

Current cardholders are exempt from the check. Employees who leave government and come back would have to get the check; they could also be checked after transferring to another agency.

Agencies' comments on the proposal were not available by press time. But the OMB document says several nonfederal entities questioned the credit checks, at least for charge accounts that are billed directly to the issuing agency, because the cardholder is not liable for the charges.

"There does not appear to be a correlation between creditworthiness and the likelihood that a credit product will be used in a responsible and law abiding manner," the comments said, as summarized by OMB.

OMB replied that the measure is required by federal law, and said it's an important measure to ensure that

cardholders are financially responsible.

An official associated with the Energy Department charge card program said the credit checks "will represent a significant work effort" across government.

"You have to ask the question, what's the return on that," he said.

An Environmental Protection Agency spokeswoman, Eryn Witcher, called it a "sensible guidance for preventing abuse." It's unlikely to cause major changes at EPA because the agency already has strong controls, she said.

One procurement executive, Marc Weisman of the Health and Human Services Department, said the credit checks are going to be helpful with travel cards, which can be used for cash advances, and don't have the same purchase restrictions as do the purchase cards. Also, employees pay the bill themselves and get reimbursed, while the purchase card bills are paid by the agency.

"There's an awful lot of controls on the purchase cards, and the travel cards are not controlled in quite the same manner," he said of the HHS program.

Agencies give their employees bank-issued charge cards for work-related costs such as travel, routine purchases and other costs that aren't substantial enough to go through the formal procurement process. Their limits range from $2,500 to $100,000 or greater.

The OMB rules also spell out how managers must plan and manage their charge card programs. Agencies, for instance, must also collect charge card spending data so that analysts can spot commonly purchased items that could be bought more cheaply in bulk, a concept known as strategic sourcing, Combs said in an e-mail sent by an aide.