When employers check credit as part of their hiring it creates a vicious cycle: out-of-work Americans can’t pay down their debts because they don’t have a job, but they can’t get a job because would-be employers hold their consumer credit history against them.
The practice becomes even more untenable as you consider that credit checks in hiring have a discriminatory impact on people of color and that a major credit reporting corporation has even admitted that they lack evidence that credit reports reveal anything about job performance or likelihood to commit crime. And then there are the errors: a study by the Federal Trade Commission this year found that 21 percent of consumers had a material error on a credit report, with unpredictable effects on hiring.
Faced with a discriminatory practice that locks qualified workers out of a job, a growing number of states and cities are taking action to restrict employment credit checks, minimize their use, and even ban the practice entirely. Last month, Nevada became the tenth state to restrict employment credit checks. Yet the state laws are riddled with unjustified exemptions, allowing employers to continue screening job applicants with discriminatory credit checks for many positions despite a lack of evidence that credit history is relevant to the job. As the New York Times pointed out in an editorial last year, “laws still need to be tightened and exemptions narrowed.”
That’s why the truly noteworthy legislative action is in New York, where this week the State Assembly passed one of the nation’s strongest bills on employment credit checks.
The New York legislation is straightforward: as the bill’s sponsor, Assemblyman Jeffrey Dinowitz, explains, it “would prohibit the use of consumer credit reports in determining whether or not to hire somebody.” There are no unjustified exemptions. New York State’s legislation, along with a similarly strong bill pending in the New York City Council, is a model for the nation. Assembly Speaker Sheldon Silver underscored the economic benefits, noting that “this legislation protects New Yorkers seeking employment or advancement in their career by allowing their qualifications and experience to be the deciding factor, not their credit history. Doing so can only have a positive effect on our communities and our state's economy." Now the State Senate and Governor Cuomo must recognize these benefits and turn the model bill into the model law.