The Need to Ban Employee Credit Checks

As we emerge from the first wave of the COVID-19 pandemic, it is essential we introduce legislation to help workers. As the economy strengthens, many will be considering new positions.  It is important we take steps to aid people in searching for jobs, developing their resumes, and strengthening their interview skills.  However, not to be overlooked is an issue that may create barriers in many getting jobs they need to provide for themselves and their families. This roadblock is that employers may request credit checks from applicants. This issue can have serious negative consequences on your job search.

Problems

  • Newsday reported that during the week of April 10th, 60,000 Long Islanders filed unemployment insurance claims. Additionally, during the four weeks beginning in mid-March, more than 175,000 Long Islanders had filed for jobless benefits.
  • As a sense of normalcy returns, thousands of Long Island residents will be initiating job searches. Many former employees who have been furloughed may not be rehired.  The new reliance on technology may result in redefined job skills and job openings. 
  • Presently, part of the job application process for many positions involves applicants providing background information, including credit reports.
  • Using credit reports in hiring decisions only makes it harder for people facing economic hardship to find a job and restore their personal finances.
  • Poor credit scores can result from many circumstances, including medical debt, unemployment, layoffs, missed payments, as well as credit bureau mistakes.
  • New York, unlike 11 other states, has not passed legislation prohibiting employers from using credit checks as part of their hiring practices.
  • If an employer checks credit reports when hiring employees, it must follow the legal requirements set out in the federal Fair Credit Reporting Act (FCRA). The FCRA requires employers to:
  • get your consent before pulling the report;
  • give you a warning (along with a copy of the report received) if the employer plans to reject you based on the report, and;
  • give you an official adverse action notice if the employer does not hire you because of the contents of the report.
  • Unfortunately, a Federal Trade Commission study stated that as many as one in four consumers might have a “material error” in their credit reports. Studies have indicated that a majority of reporting errors that potentially diminish a consumer’s credit score is through no fault of the consumer.
  • Additionally, although employers must now receive consent before pulling credit reports, that has created a new problem in itself. If an applicant elects not to give consent, employers take that as an admission of poor credit and can choose not to hire that applicant anyway.

Today, because of the sudden financial turndown and the sharp increase in individuals losing their jobs, it is predictable that job applicants will have compromised credit histories. Prohibiting employer use of credit scores to screen applicants for jobs is absolutely imperative.

Solutions

  • The New York State Assembly must reintroduce and pass the 2013 Credit Privacy in Employment Act, or very similar legislation. The New York State Assembly passed the Credit Privacy in Employment Act (A.07056) in June 2013, but it failed to pass the Senate (S.03868).
  • The Assembly considered that the legislation was designed to restrict employer access to private credit information. When doing so, they noted that there is no objective evidence showing a correlation between an employee’s consumer credit report and their job performance or tendency to commit fraud.
  • This Act would apply to employers, employment agencies and licensing agencies.
  • The law would not apply to certain exempt positions such as law enforcement, professions involving high levels of public trust, or when federal or state laws mandate credit checks.
  • The New York State Senate must be encouraged to reintroduce a similar bill and to pass that legislation on a priority basis.
  • The State legislature should also consider passing legislation similar to that passed by New York City. In 2015, New York City enacted The Stop Credit Discrimination in Employment Act (SCDEA), which prohibits discrimination based on consumer credit history in employment.  Under the Act, it is unlawful for employers to request or use the consumer credit history of job applicants from being discriminated against by employers on the basis of consumer credit history.
  • The basis for the SCDEA legislation was centered on arguments that New Yorkers should be judged by their merit and qualifications in seeking employment. They should be afforded a chance to compete for a job based on their skills and qualifications, not three digits on a financial report. While applicants may have or had financial difficulties, they are no less hardworking, qualified, or trustworthy than anyone else. A person’s credit history does not reflect their past job performance or qualifications.
  • Assuming the legislation becomes law, provisions must be made to educate consumers, job applicants, employers, consumer credit agencies about the law, its enforcement, and penalties for non-compliance.