Time to End Discriminatory Employer Credit Checks

David R. Jones, La Nueva Mayoria / The New Majority

Last week, the New York City Council held a public hearing on a bill that would ban employers from using personal credit history to make hiring and promotion decisions. The Council’s “Stop Credit Discrimination in Employment Act” seeks to remove a chief obstacle to employment for many people who have fallen behind on their bills because they are unemployed. Sadly, in their effort to find work so that they can get back on track economically, their poor credit rating works against them.

A coalition of community, civil rights and labor groups have mobilized to raise public awareness about the harmful effects of employer credit checks. This practice disproportionately impacts low-income New Yorkers and communities of color who are more likely to have low credit ratings.

Minorities Especially Vulnerable to Poor Credit

Negative credit history often comes from medical debt, divorce, or unemployment, all of which are more prevalent in communities of color. According to our annual Unheard Third survey, 23 percent of low-income respondents in the city reported having debt due to medical bills.

As a result of the Great Recession, many New Yorkers ended up losing their savings, retirement accounts and falling behind on mortgage payments making them prime candidates for negative credit ratings. Black and Latino families were especially vulnerable to poor credit in the aftermath of the housing bubble since they were the main targets of predatory lenders peddling subprime loans.

It’s wrong for employers to deny jobs to people who want to work and who come from communities with the highest unemployment rates simply because of their credit history. Equally troubling is using this practice as a barrier to employment for young job-seekers emerging from college or graduate school steeped in debt. In 2013, the average college student graduated with $35,200 in student loan, credit card and other college-related debt.  Imagine already being saddled with thousands in student debt only to be told by a prospective employer that you are being denied an equal shot at a job that could help you pay off that debt.

Half of U.S. Employers Use Credit Checks

The Council bill is not the first restricting the use of credit history in hiring. According to Demos, a national public policy research organization committed to reducing economic disparities and one of the lead advocates for credit check legislation, ten states and dozens of municipalities have laws on the books prohibiting employers from using personal credit information in making employment decisions. Several others are currently considering legislation. Last year, the New York State Assembly passed the Credit Privacy in Employment Act (A7056), but that bill died in the Senate in January 2014. 

Unlike many laws restricting employment credit checks, the New York City bill avoids the kind of loopholes or industry “carve-outs” that weaken legislation and lead to the creation of two-tier employment tracks along the lines of race and class.

Nearly half of U.S. employers utilize credit checks to screen job applicants. A big reason for that is the for-profit credit reporting companies themselves who have invested heavily in marketing their credit reports to employers. Unfortunately, there seems to be little concern about how this practice hurts people who have damaged credit, and are struggling to find work so they can meet their financial obligations.

With unemployment in minority communities still at elevated levels, it’s more important than ever that we remove pernicious and unjustified barriers to employment. And it is important to understand just how difficult it is for low-income families to remain in good financial standing after the loss of a job.   Of low-income Latinos in New York City households where someone lost a job in the past year, 46 percent had no savings and 65 percent had less than $500 in savings.  It is not surprising that someone in that predicament would see their credit rating decline.  No employer should be allowed to use an applicant’s economic difficulties against them as they try to get back on track.

Issues Covered

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