Senators Elizabeth Warren and Steve Cohen are putting the pressure in the right place by reintroducing this bill. This legislation would prevent employers from considering credit histories when making hiring decisions. Currently, nearly 50% of employers are basing hiring decisions on data pulled from credit reports. This practice has raised alarm bells about equity and discriminatory practices in employment technology.
The draft legislation would reshape the Fair Credit Reporting Act in a number of ways. Its narrow focus is on the use of credit history in employment decisions. If the bill passes, employers would no longer be able to require job applicants to disclose their credit history. They too will not be able to get consumer or investigative reports on future hires.
A new report by the Urban Institute exposes a harsh reality—credit reports punish people of color. These reports often rule them out of job consideration altogether. As her office noted, women are particularly likely to have bad credit. This further exacerbates the inequality that has already creeped into hiring practices.
Cohen emphasized the inaccuracies of credit scores in predicting job performance, stating, “Using a job applicant’s credit history to deny employment is not just unfair, it makes no sense. Credit scores are an inaccurate way to predict future job performance or ability.” These kinds of feelings are indicative of a burgeoning understanding that financial pasts should not determine job prospects.
A 2012 Demos survey revealed that one in ten respondents had been denied a job due to information found in their credit report. This staggering statistic highlights the gulf between one’s credit history and their suitability for any given job, reiterating the urgent call for legislative action.
There are some encouraging signs. Many states have already moved in this direction. So far California, Colorado, Hawaii, Illinois, Nevada, Oregon and Washington have passed legislation. They have passed legislation that prohibits employers from considering credit reports when hiring new employees. At least five municipalities have adopted local laws banning this practice. New York City banned the use of credit history in employment decisions in 2015, and there is currently a push for a statewide ban.
Exemptions to these laws usually cover national security jobs or jobs that fall under the umbrella of financial services. Warren and Cohen have already stepped up with a bold bill to address these practices head on. It seeks to create a more expansive ban, to all industries and sectors.
Warren stated, “Nobody should be discriminated against and miss out on a job opportunity because of their financial history.” This point of view resonates strongly with the burgeoning second chance movement calling for fair hiring practices that look beyond outdated and harmful measures.