Statements on Introduced Bills and Joint Resolutionsby Senator Elizabeth Warren
Posted on 2013-12-17
WARREN (for herself, Mr. Blumenthal, Mr. Brown, Mr. Leahy,
Mr. Markey, Mrs. Shaheen, and Mr. Whitehouse):
S. 1837. A bill to amend the Fair Credit Reporting Act to prohibit
the use of consumer credit checks against prospective and current
employees for the purposes of making adverse employment decisions; to
the Committee on Health, Education, Labor, and Pensions.
Ms. WARREN. Mr. President, I come to the floor in support of the Equal Employment for All Act, a bill I introduced today with Senators Blumenthal, Brown, Leahy, Markey, Shaheen, and Whitehouse. This legislation would prohibit employers from requiring prospective employees to disclose their credit history as part of the job application process. It makes sure that hiring decisions are based on an individual's skill and experience--not on past financial problems. This is also about basic fairness. Let people compete for jobs on the merits, not on whether they have enough money to pay all their bills.
Many people have bad credit because they hit hard times. They got sick, their husband left or their wife died or they lost their jobs. These are tough events under any circumstances, and they often put a real financial strain on a person. That strain sometimes results in late payments or an increase in the amount of money they must borrow.
The problems of bad credit were compounded following the 2008 financial crisis. Millions of people stumbled financially when shrinking home prices left them unable to refinance or to sell a home. Depreciated savings left people with a smaller financial cushion to survive fluctuations in their income. People lost their small businesses and found themselves mired in debt. For too many people, the fallout from the 2008 crisis also damaged their credit.
Much of America, hard-working, bill-paying America, has a damaged credit rating, and the impact of that bad credit rating lasts a long time. Negative information generally remains on a credit report for 7 years and, in some cases, it lasts even longer.
Most people recognize that one consequence of bad credit is that they are going to have trouble borrowing money or they are going to pay more when they borrow. But for many people, a damaged credit rating can block access to a job. After a terrible blow--a job loss, a death in the family, a divorce, a serious medical problem--many people are scrambling to get back to work or to pick up a second job or to change jobs so they can get back on their feet financially, but they are knocked back by damaged credit. Today, highly qualified applicants with bad credit can be shut out of the job market. This is wrong.
It was once thought a credit history would provide insight into a person's character and, today, many companies routinely require credit reports from job applicants. But research has shown that an individual's credit rating has little to no correlation with his or her ability to succeed in the workplace. A bad credit rating is far more often the result of an unexpected personal crisis or economic downturn than a reflection of someone's character or abilities.
The Equal Employment for All Act would amend the Fair Credit Reporting Act to put an end to these unfair and harmful practices. This would benefit millions of American families down on their luck, giving them a chance to rebuild their financial security. It will particularly help women, minorities, students, and seniors because these groups are disproportionately likely to be hit hard by bad credit ratings. For example, the economic fallout from a divorce often hits women's finances particularly hard. It only gets more difficult for women when they apply for good jobs for which they are fully qualified, but they are barred because employers insist on examining their credit history.
Another challenge with using credit reports during the job application process is that they are not always accurate. According to a February 2013 FTC report, 20 percent of consumers could identify at least one error in their credit reports.
Unfortunately, someone whose credit report has a significant error may have trouble learning about the mistake and, even if the mistake is identified, have trouble getting it corrected in a reasonable time.
According to the same FTC report, correcting credit report errors can be difficult to manage and the reporting agencies can be unresponsive. This means innocent job applicants are paying the price for a credit rating company's mistake.
This is only one more way the game is rigged. A rich person who loses a job, gets divorced or faces a family illness is unlikely to suffer from a drop in his credit or her credit rating. But for millions of working families, a hard personal blow translates into a hard financial blow that will show up for years in a credit report. No one should be denied the chance to compete for a job because of a credit report that bears no relationship to job performance and that can be riddled with inaccuracies.
In the aftermath of the 2008 financial crisis--a crisis that hammered middle-class families and from which millions of families are still struggling to recover--these practices should be stopped. It is time to give more families a chance to get back in the workforce and to get back on their feet.