Legislation Would Prohibit Employers From Looking At Credit Reports During The Hiring Process

A poor credit report can have a devastating impact on a consumers’ life – preventing them from receiving needed lines of credit, losing out on renting or buying a home, or even being passed over for a job. But one of those issues could be a thing of the past with the reintroduction of legislation that would prohibit potential employers from using credit history during the job screening process.

Massachusetts Senator Elizabeth Warren, and several co-sponsors, introduced the Equal Employment for All Act [PDF] that would amend the Fair Credit Reporting Act to ensure that even consumers with bad credit histories have a fair shot of obtaining employment.

According to the bill, employers would be prohibited from disqualifying employees based on a poor credit rating, or information on a consumer’s creditworthiness, standing or capacity.

In the past, employers have use credit reports as a way to get insight into an prospective employee’s character. However, research on the subject has shown that an individual’s credit rating has little correlation with their ability to be successful in the workplace.

“A bad credit rating is far more often the result of unexpected medical costs, unemployment, economic downturns, or other bad breaks than it is a reflection on an individual’s character or abilities,” Warren said in a statement.

Additionally, reports have shown that many issues showing up on consumers’ credit histories often include difficult to correct errors – debts that were never theirs or debts they’ve paid off but continue to appear in their histories.

“It makes no sense to make it harder for people to get jobs because of a system of credit reporting that has no correlation with job performance and that can be riddled with inaccuracies,” Warren said.

While the legislation could improve the hiring process for consumers struggling to make ends meet, it does provide an exemption for positions that require national security clearances.

The Act, which is similar to a measure that was introduced and then stalled in the legislature back in 2013, has been endorsed by more than 40 organizations including the NAACP, National Association of Consumer Advocates, National Fair Housing Alliance, and Public Citizen.