Bill aims to stop employers from conducting credit checks

  @blakeellis3 December 17, 2013: 5:52 PM ET
elizabeth warren

Senator Elizabeth Warren proposed the Equal Employment for All Act with six other senators.

NEW YORK (CNNMoney)

A federal bill introduced Tuesday would prevent employers from denying job applicants based on their credit.

Senator Elizabeth Warren, a Democrat from Massachusetts, proposed the Equal Employment for All Act with six other senators. Under the bill, employers would no longer be able to require prospective employees to go through a credit check or reject them due to negative information in a credit report.

Such practices have become common among businesses. A report released this year from liberal think-tank Demos found that one in ten unemployed Americans have been denied a job due to information in their credit reports. And these checks are conducted for all kinds of positions -- from entry level to senior management.

Related: Bad credit cost me a job

Bad credit can be a result of many factors, but one of the most common reasons is the loss of a job and subsequently, health insurance -- which makes it difficult to keep up with the bills, Demos found.

Warren, along with other advocates of the bill, say that employer credit checks are therefore keeping many people out of the labor market who need jobs the most. In addition, there's no proof that a person's credit has any correlation with job performance, and these checks have also been shown to unfairly impact certain groups of people -- including women, minorities, students and seniors.

Warren to Yellen: Focus on banks

"There's little or no evidence of any correlation between job performance and a credit [report]," Warren said on a call with reporters. "[T]his is a point of basic fairness ... people who get hit with hard economic blows end up getting squeezed out of the system. This is another way the game is rigged against hardworking middle-class families."

Related: Employer credit checks keep jobless out of workforce

Errors in credit reports are also common, potentially leading to unfair hiring decisions based on incorrect information. A recent Federal Trade Commission study found that one in five consumers has an error in their credit report.

The bill provides an exemption, however, for government jobs that require employees to have national security clearances.

More than 50 advocacy groups signed a letter Tuesday urging senators nationwide to cosponsor the Equal Employment for All Act, including the NAACP and the Leadership Conference on Civil and Human Rights.

"Discriminatory credit checks are bad for employers, they're bad for job seekers, and they're bad for our economy. In order to have an inclusive recovery where all Americans have a chance to take part, Congress must pass the Equal Employment for All Act," said Nancy Zirkin, executive vice president of The Leadership Conference on Civil and Human Rights. To top of page



Join the Conversation
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.32%4.26%
15 yr fixed3.36%3.27%
5/1 ARM3.37%3.27%
30 yr refi4.31%4.24%
15 yr refi3.34%3.25%
View rates in your area
 
Find personalized rates:
Rate data provided
by Bankrate.com
CNNMoney Sponsors
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.