141.1 - Bad-news-good-news: employer credit checks

Bad-news-good-news: employer credit checks

Okay, a little yin-yang to start the week off. A couple of bad news-good news deals.

First of the bad-news-good-news bits is that it is becoming common for employers to demand that you let them run a credit check on you before they decide about hiring you. A recent study by the organization Demos cited a recent survey of human resources professionals which showed that nearly half of employers check an employee’s credit history when hiring for some or all positions.

And it's not limited to high-level management positions: Quoting the Demos study,

even a brief look at a popular job listing website reveals that employers require credit checks for jobs as diverse as doing maintenance work, offering telephone tech support, assisting in an office, working as a delivery driver, selling insurance, laboring as a home care aide, supervising a stockroom and serving frozen yogurt.

The credit reporting industry obviously has a financial interest in convincing employers that paying for credit reports is a good, even necessary, self-defense measure against employee theft or fraud. The trouble is, that argument doesn't wash. Industry PR flaks will insist that "living beyond one's means" is a red flag for potential employee theft - but as anyone living in the real world can tell you, being in debt or having a troubled credit history nowadays has little if any connection with "living beyond your means." It's far more likely to have a connection to something like long-term unemployment or a health crisis - or, as it happened in my family, a health crisis that lead to long-term unemployment.

In fact, a representative of TransUnion, one of the major credit reporting companies, admitted that they “don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.”

In other words, it's all a waste of time and money. So why do employers do it? Some because they fall for the industry BS. Some because it's an easy way to winnow down the field of applicants that doesn't require them to actually make decisions or do any thinking. And some do it because they can, because it's a way of demonstrating their power over you, their ability to make you submit to their demands for the sake of having work.

Whatever the reason in a particular case, the end result is that the practice is not only racially discriminatory, because people of color are disproportionately likely to have problems with their credit scores, but, as Demos put it, it

create[s] an untenable Catch-22 for job seekers: They are unable to secure a job because of damaged credit and unable to escape debt and improve their credit because they cannot find work.

The good news here is that there is some push-back. Six senators, lead by Elizabeth Warren, have introduced the Equal Employment for All Act, would make it illegal for employers (except for national security jobs) to require that job applicants disclose their credit history.

Warren called credit checks "one more way the game is rigged," a "game" where relatively common life events such as a divorce, an illness, or a period of unemployment will have a much greater negative impact on the credit score of a middle- or lower-class person than on that of a rich one.

She also said that the act is "about basic fairness" and that people should be able to "compete for jobs on the merits, not on whether they already have enough money to pay their bills."

Warren has no illusions either about the chances that her bill will pass or that, if it does pass, it will benefit a large number of people. And yes, the number of people who are affected is relatively small. That doesn't make the practice any less heinous or the push-back against it any less a good place to stand.

Sources:
http://www.demos.org/discredited-how-employment-credit-checks-keep-qualified-workers-out-job
http://www.demos.org/
http://www.demos.org/sites/default/files/publications/Discredited-Demos.pdf
http://www.salon.com/2013/12/18/elizabeth_warrens_bold_new_crusade_keeping_employers_out_of_your_credit_history/
http://www.demos.org/publication/problem-employment-credit-checks-why-america-needs-senator-warren%E2%80%99s-equal-employment-all
http://www.care2.com/causes/should-credit-scores-be-fair-game-in-the-job-hiring-process.html