Credit Report Usage in Hiring Practices
A bill by Elizabeth Warren would ban credit report usage in most job hiring.
9/15/20252 min read
A bill reintroduced by Senator Warren from Massachusetts, and Steve Cohen, a Tennessee representative, would ban most employers from using credit checks to vet potential hires. If passed, it would amend the Fair Credit Reporting Act to stop employers from requiring job applicants to disclose their credit history, as well as the acquisition of consumer reports on applicants. Even the “suggestion” of providing your credit history as a “good idea” would not be permitted.
Amazingly, I’m actually agreeing with Elizabeth Warren on an issue, at least to some extent. Part Two of the bill would also prohibit credit reporting agencies from providing reports to employers. Based on that, if agencies can’t release reports, employers would have little reason to ask in the first place.
Democrats argue that denying jobs based on a candidate’s financial history “makes no sense”. I would agree, with some exceptions - such as national security roles or positions in financial services. For the record, those exceptions are in the bill. There’s also another exception which I’ll address shortly
Democrats also argue that financial reports discriminate against minorities, intentionally or otherwise. She also includes women in that category because, they too, tend to have lower credit scores. While I can see discrimination as a possibility, most employers will want the absolute best person they can find for a job. Hence, I’m not convinced race or sex is a major factor, though I’m sure it happens.
Versions of the legislation have been proposed since the 2008-09 housing bubble collapse, and the following economic recession. That was a time when many people went into additional debt and had a hard time keeping up with payments.
Just how many employers use credit reports as a factor in hiring? According to the Urban Institute, about half of employers use information from credit reports in their hiring processes. I think that sounds like an extreme exaggeration. Why? Over half of companies have fewer than five employees – and over 80% have fewer than twenty. I just don’t see those small operations doing credit checks unless those employees will be manning cash registers. Even then, many businesses have security cameras aimed at the register.
As for the additional exception, I can see larger employers using credit reports because they often show those with outstanding medical debt. With large employers usually having to provide some type of mandated health insurance, I can understand not wanting to hire “medical cases” due to costs of those programs and lost time on the job.
A study from thirteen years ago, reported 10% of people have been refused a job due to a credit check. Probably not a lot when one allows for the exceptions, but that could be higher today if the “half of companies” statement is actually correct.
With the opposing party in control, I honestly don’t see this bill passing, though maybe it should. What do you think?
Source used: Guardian