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Warren Bill Would End Employer Credit Checks

Christine DiGangi

Senators introduced legislation Tuesday that would bar employers from requiring potential employees to share their credit reports as part of their job applications. The bill, called the Equal Employment for All Act, also prohibits employers from disqualifying candidates based on creditworthiness.

In a news release about the bill, Sen. Elizabeth Warren (D-Mass.) explained the motivation behind the proposed amendment to the Fair Credit Reporting Act:

“A bad credit rating is far more often the result of unexpected medical costs, unemployment, economic downturns, or other bad breaks than it is a reflection on an individual’s character or abilities,” Warren said. “This is about basic fairness — let people compete on the merits, not on whether they already have enough money to pay all their bills.”

Sens. Richard Blumenthal (D-Conn.), Sherrod Brown (D-Ohio), Patrick Leahy (D-Vt.), Edward J. Markey (D-Mass.), Jeanne Shaheen (D-N.H.) and Sheldon Whitehouse (D-R.I.) co-sponsored the legislation.

The bill includes exceptions for positions requiring national security clearance or any other positions for which a credit check is legally required.

Employers do not reference applicants’ credit scores as part of the hiring practice, however, they may see a credit report (on which credit scores are based). Employers much get consent from job applicant before being able to pull the report, however. Credit reports contain a consumer’s payment history, credit age, debt usage, account mix and inquiries, among other information. (Each of us is entitled to a free copy of all three of our major credit reports from the credit reporting agencies Experian, Equifax and TransUnion. In addition, Credit.com’s free Credit Report Card provides a explanation of the information in your credit report, along with two credit scores.)

As noted in a fact sheet about the bill released by Warren’s office, consumers’ credit can suffer as a result of unexpected economic events, illness, small oversights and reporting errors and the bill posits that these factors do not necessarily reflect a job applicant’s competency or level of responsibility.

Currently 10 states - California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington – already restrict employer access to credit reports.

The senators focused on the relationship — or rather, the lack thereof — between credit standing and employee reliability, as well as on the adverse effects of credit-reporting errors. They argue that tying a credit report to a job application could keep people who are struggling with debt from getting jobs they need to emerge from financial distress. In other words, it’s a Catch-22.

There are likely going to be opponents to the measure. In 2012, a consortium of industry associations drafted a letter to the Equal Employment Opportunity Commission defending the practice of using credit data in the job application process.

The letter noted that, “Credit reports are reliable, proven indicators of risk,” and outlined situations in which the use of credit reports in employment screening could be considered a “business necessity.” The letter was signed by  the American Bankers Association, American Staffing Association, American Society of Employers, American Trucking Association, ASIS International, Assisted Living Federation of America, Automotive Aftermarket Industry Association, Consumer Data Industry Association, International Public Management Association for Human Resources, National Council of Chain Restaurants, National Restaurant Association, National Ski Areas Association and the Society for Human Resource Management.

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