Elizabeth Warren's bold new crusade: Keep employers out of your credit history

With credit scores being exploited to cut people out of the job market, here's how the senator is fighting back

Published December 18, 2013 1:30PM (EST)

  (Reuters/Joshua Roberts)
(Reuters/Joshua Roberts)

Decrying a "rigged" system and the long overhang of the 2008 crash, Sen. Elizabeth Warren Tuesday introduced a bill to ban mandatory pre-employment credit checks. “This act is about basic fairness,” the Massachusetts Democrat told reporters on a Tuesday call. “Let people compete for jobs on the merits, not whether they already have enough money to pay all their bills.”

Warren’s bill, the Equal Employment for All Act, would make it illegal for employers (outside national security jobs) to require that job applicants disclose their credit history. Warren’s Senate bill is co-sponsored by six Senate Democrats, including Vermont’s Patrick Leahy and Ohio’s Sherrod Brown, and is based on a bill Rep. Steve Cohen, D-Tenn., introduced in 2011 in the House. “A credit score,” Warren argued, “should not be used as a way to cut people out of the job market.”

“This is one more way the game is rigged,” said Warren. Whereas rich people "don't see their credit scores go down 150 points" when they get divorced, Warren argued that “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.” In a 2012 California Law Review essay, the University of Texas’ Angela Littwin wrote that “As consumer lending has permeated American life, violent partners have begun using debt as a means of exercising abusive control, making the consumer credit system an unknowing party to domestic violence.”

“Pre-employment credit checks disproportionately hit minorities, students and seniors,” Warren told Salon, “because these groups are likely to be hit hard by bad credit scores.” She told reporters that her bill addresses “a problem that’s become even more acute in the wake of the 2008 financial crisis,” where many “were hit really hard financially, and now they’ve got credit scores that, the bad information will persist for seven years, or in some cases longer.”

Echoing advocates, Warren noted a study suggesting a fifth of consumers, when given the chance, could find at least one inaccuracy in their own credit report, and argued there was “little or no evidence or any correlation between job performance and a credit score.”

Warren spoke on a call hosted by the progressive think tank Demos, which previously released a report offering evidence credit checks “can create an untenable Catch-22 for job seekers: They are unable to secure a job because of damaged credit and unable to escape debt and improve their credit because they cannot find work.” Sen. Warren and Demos experts were joined by military veteran Emmet Pinkston, who said he had worked on a presidential security detail but was denied a job he sought at the Transportation Security Administration due to “erroneous entries” on his credit report. “My character was put into question because of an improperly managed credit report history,” said Pinkston. According to a 2012 Society of Human Resources Management study cited by Demos, 47 percent of companies employ credit checks in at least some of their hiring.

The billionaire Pritzker family, which includes Obama’s second term Commerce Secretary Penny Pritzker, owned the majority of the credit report company TransUnion until a 2010 sale to a private equity firm. Salon's inquiries to TransUnion and two other industry leaders, Equifax and Experian, yielded a response from the Consumer Data Industry Association, whose vice president, Norm Magnuson, emailed that “companies should have information available to them that might impact the business in general and employees in particular.”

Citing data from the Association of Certified Fraud Examiners, which he said showed that “living beyond his or her financial means or experiencing financial difficulties” were the “top two red-flag warnings” for employee theft, Magnuson said such crimes “can very well determine whether a small business survives or not.” Magnuson wrote that a 2008 study in the International Journal of Selection and Assessment showed “that employees with financial history concerns were significantly more likely to engage in counterproductive work behavior than those without financial concerns.” Demos senior policy analyst Amy Traub rejected CDIA’s invocation of the 2008 study on several counts, noting it was limited to “government employees who filled out a specialized questionnaire”; that it involved business debts as well as personal credit; and that its authors identified it as “provisional” and said “more research is needed” to assess the effectiveness of credit history in predicting misbehavior. Traub emailed that two subsequent studies – one in the Journal of Applied Psychology  and another in the Psychologist Manager Journal – had “found no correlation between personal credit and propensity to commit theft or any other ‘counterproductive workplace behaviors.’”

Asked about her bill’s prospects for passage, Warren said she understood “how difficult it is to get a bill through the United States Congress,” and had “no illusions,” but “I know that nothing happens if you don’t take the first step.” She added, “People told me it wasn’t possible to get the Consumer Financial Protection Bureau through, and yet we did it.” Asked if she’d reached out to Republicans for support, Warren said, “We’re in the middle of talking to lots of people.”

By Josh Eidelson

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Related Topics ------------------------------------------

Credit Democrats Demos Economy Elizabeth Warren Law Patrick Leahy Penny Pritzker Sherrod Brown