Bill Would Prohibit Employers from Using Credit Reports in Background Checks

 CreditReport

Written By ESR News Blog Editor Thomas Ahearn

Legislation introduced in the U.S. Senate – the “Equal Employment for All Act of 2015” – would amend the federal Fair Credit Reporting Act (FCRA) to prohibit employers from using the credit reports of job applicants and current employees during background checks for employment. The text of the legislation is at http://www.warren.senate.gov/files/documents/Equal_Employment_for_All_Act_of_2015.pdf.

According to a Fact Sheet for the Equal Employment for All Act, research shows that poor credit “is more often the result of medical bills or unemployment than a mark of someone’s character or ability to perform in the workplace.” In addition, “credit reports are not always accurate, and poor credit disproportionately targets women, minorities, and those already struggling financially.”

As a result, “including credit checks as part of the hiring process bars qualified workers from entering the workforce.” The Equal Employment for All Act of 2015 would prohibit employers from requiring job applicants to disclose their credit history to ensure “that hiring decisions are made based on an individual’s skill and experience rather than credit reports.” The Fact Sheet states the bill would:

  • “Amend the Fair Credit Reporting Act (FCRA) to stop employers from requiring or suggesting that applicants disclose their credit history and from procuring a consumer or investigative report.
  • Prohibit employers from disqualifying employees based on a poor credit rating, or information on a consumer’s creditworthiness, standing or capacity.
  • Include exemptions for positions that require national security clearance.”

“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,” Senator Elizabeth Warren (D-MA), who introduced the bill, stated in a press release. “This is about basic fairness — let people compete on the merits, not on whether they already have enough money to pay all their bills.”

As reported earlier by ESR News, the Federal Trade Commission (FTC) issued a follow-up study of credit report accuracy that found most consumers with previously reported unresolved errors on their credit reports believe that some disputed information on those reports is still inaccurate. The study is available here: Report to Congress Under Section 319 of the Fair and Accurate Credit Transactions Act of 2003.

The FTC study was the sixth and final study on national credit report accuracy and follows a study issued by the FTC in 2012 which examined how many consumers had errors on one of their three major credit reports. The 2012 study found that one in five consumers had an error on a credit report that was corrected by a credit reporting agency (CRA) after a dispute.

More Credit Report Information from ESR

Employment Screening Resources® (ESR) – ‘The Background Check Authority®’– offers employers information about states with laws regulating credit reports for employment, blogs about credit reports, and a whitepaper about using credit reports for background checks. For more information about ESR, call toll free 888.999.4474 or visit http://www.esrcheck.com.

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