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A Step Toward Justice and a Missed Opportunity on Employment Credit Checks

Amy Traub

On Wednesday the U.S. Equal Employment Opportunity Commission took the historic step of updating its guidance on the use of criminal records in employment screening. Since a disproportionate number of Americans with criminal records come from low-income communities of color, this is a major civil rights victory. Based on the Civil Rights Act of 1964, the EEOC has long held that it is illegal for employers to exclude job applicants on account of their criminal record unless the crime is directly relevant to the job in question. But in the absence of up-to-date guidance from the EEOC, 90 percent of employers now conduct criminal background checks on some or all job candidates. It’s clear that new guidelines were needed to help courts, employers, and private screening firms act in a responsible and non-discriminatory fashion and to prevent a situation in which, “old arrests and minor convictions can turn into life sentences of joblessnessin the words of the Lawyers’ Committee for Civil Rights Under Law.

The EEOC should be applauded for its critical move on criminal background checks. But more remains to be done. On Wednesday, the EEOC passed up an opportunity to issue guidance on employment credit checks, failing to make the case that disqualifying someone from a job due to their poor credit also erects a discriminatory barrier to employment

The evidence that the use of employment credit checks is having a disparate impact on communities of color is strong. Studies from the Federal Reserve Board, the Federal Trade Commission and others have consistently that found that average credit scores of African Americans are lower than those of whites. In addition, credit continues to be offered on discriminatory terms: in the last decade predatory lending schemes targeting communities of color compounded historic disparities in wealth and assets, leaving African-Americans, Latinos, and other people of color at greater risk of foreclosure and default on loans.

Since the financial crash, households of color have lost more than half of their family wealth—leaving them with fewer assets to fall back on during emergencies to avoid debt. This compares to a 16 percent loss among white households. Today, families of color have less than a dime in wealth for every dollar held by white families. Employment credit checks can perpetuate and amplify this injustice, translating a legacy of unfair lending into another subtle means of employment discrimination.

The courts have recognized the discriminatory impact of employment credit screening. The Department of Labor won a verdict against Bank of America based partially on the bank’s use of credit checks to hire entry-level employees, which had a discriminatory impact on African-Americans.

Employment credit checks can also have a discriminatory impact on other protected groups: since more than half of all accounts reported to collection agencies are for medical debts, employers are effectively inquiring into job applicants’ private health history when they require an employment credit check.  This violates the spirit of the Americans with Disabilities Act. Finally, we know that in many cases women who are the victims of domestic abuse will have credit problems because their abuser has intentionally damaged their credit.  Requiring that these women undergo a credit check as a condition of employment is likely to bring the highly personal details into the hiring process. 

Unfortunately, the EEOC will not have another opportunity to take action on employment credit checks for several months. Commissioner Stuart Ishimaru has announced that he will resign at the end of April,  effectively blocking guidance on employment credit checks until a new commissioner is named.  President Obama should nominate a new commissioner quickly: to truly ensure equal employment for all, the EEOC must follow its important action on criminal background checks with strong guidance addressing the use of credit checks in employment decisions.