The Evidence Against Employment Credit Checks

Last year, Demos started a high school summer internship program. We select a rising senior from a New York City school in a lower income community. The student, paid the Demos minimum wage, spends the summer supporting the legal and administrative teams and meeting with staff to learn about careers, colleges, and the work we do.

During the program, students write a blog post about a Demos topic that interests them. Below is the post by the 2015 high school intern, Astia Innis, who starts her senior year at a Bronx public high school today.


During my summer internship at Demos, I read the Demos report Discredited by Amy Traub, and learned about practices that employers use in that disproportionately keep people of color out of jobs. As a Black high school student going into my senior year this fall, I am worried about how these practices can affect my career in the future and I want to see them negated.

Discredited includes evidence that proves employment credit checks constitute an illegitimate obstacle to employment. The key findings in this report show that employment credit checks are common, that unemployment sometimes leads to poor credit which then furthers unemployment and that people of color are more likely to report poor credit as a result of predatory lending that targets communities of color as well as discrimination in employment and housing. Both reports explicate clear employment practices keeping people of color out of jobs.

While I found quite a few things about credit checks disturbing, most disturbing is that they are so unwarranted. There is no evidence that credit checks provide any information on how well a prospective employee can do the job. Credit reports were designed as a tool for lenders to evaluate risks associated with prospective borrowers; they were not designed as employment screening tools. They provide records of social security numbers, all known addresses and all known debts that are in collection, including medical bills. All of this information is completely unnecessary for employment, not to mention a huge infringement on privacy.

It’s also a waste of resources. In Discredited, a reference was made to Alfred Carpenter. Due to an injury acquired from playing hockey, Carpenter racked up $50,000 in medical debt and was rejected from numerous jobs because of it.  He eventually had to go on welfare even though he was healthy and able to work. He cost the government $70,000 in unnecessary spending. 

Discredited mentions that employers are required to obtain written permission from individuals whose credit report they seek to review. Also, job applicants should be provided with a few days to identify and dispute any errors in the report before employers take action. However, many employers do not comply with this practice, thus all these protections are hollow and do not protect job applicants. In addition, even if these protections were being adhered to, job applicants who refuse a credit check can be rejected from consideration for the job, which means more needs to be done on their behalf.

The way I see it, implementing policies for employment credit checks would benefit the government in addition to benefiting the members of the workforce. Though a growing number of state laws restrict circumstances where an employer can discriminate against job applicants on the basis of credit history, federal law permits the opposite.  Why not make it a federal law? 

In recent years, eight states, including California, Connecticut and Maryland have passed laws restricting credit checks and dozens of cities and states are following suit by introducing bills. An attempt has been made in the state of New York City to correct this unfair practice. A bill that proposes banning employment credit checks was passed.  We at Demos are happy about the progress being made. This new law is an important step forward and the strongest like it so far, with many fewer exemptions than other state laws.

While it is certainly heartwarming to see that people are fed up and have decided to do something about this issue, it needs to be realized on a national scale. It would seem that this wish will be a reality soon. On August 5, 2015, United States Senator Elizabeth Warren (D-Mass.) introduced the Equal Employment for All Act with numerous other senators from various states. The legislation would prohibit employers from requiring potential employees to disclose their credit history as part of the job application process. I am happy that the stereotype that poor credit denotes poor character is being broken. No one, no matter what occupation, should ever be discriminated against because of their credit history.

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