Bill to curb employer credit check passes N.Y. Assembly
By Kristie Aronow
Afraid your bad credit may be holding you back from a great
That soon may not be a concern for job-hunting New Yorkers, as
the Credit Privacy in Employment Act passed the New York Assembly on June 20.
The act will largely ban employers from using credit reports to influence
Jeffrey Dinowitz, a New York assemblyman and
chair of the Consumer Affairs and Protections Committee, sponsored the
bill, which now moves to the Senate, which ended its session this week. Under New York legislative rules, the bill can be considered by the Sentate when it returns to session in January 2014.
"Many people, who would otherwise do a good job, aren't
being hired because of the false assumption that a bad credit history relates
to how well they perform their job," Dinowitz said on a video posted to his website.
Currently, the Fair Credit Reporting Act makes it legal for
employers to check an applicant's credit history. But 10 states have laws limiting employers'
use of checking credit reports when considering job applicants. Those states
are California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon,
Vermont and Washington.* Last year, 35 similar bills in 17 states were up for debate
during their respective legislative sessions. According to the National
Conference of State Legislature, some bills died in committee, while others,
such as two Nebraska legislative bills, were "indefinitely postponed."
Amy Traub, a policy analyst at Demos, a consumer advocacy
group, has studied the effects of employment credit
checks on low- and middle-income households. Traub says the New York act is
one of the strongest bills that would prohibit employers from using consumer
credit reports when making hiring and promotion decisions. "Some state laws
have exemptions for anyone who handles money," Traub says. "That's a lot of
positions, including low-level positions like someone working in a coffee shop
or retail clerk," she says.
There is also federal legislation pending that would limit credit checks' use in employment. In February, U.S. Rep. Steve
Cohen submitted the Equal Employment for All Act, which would outlaw the credit check practice for a majority of
job seekers. The bill makes exceptions for jobs that require special security clearances.
If Cohen's bill were to pass, Americans would no longer be
in a debt Catch-22. "To pay down their debt they need a job, but they can't get
hired because of their credit score," Cohen said in an email "Second chances in
Hollywood and professional sports occur every day, but not for Americans who
are desperately looking for work. We should be doing everything in our power to
help people find jobs during these tough economic times - not hinder them,"
Checks diminishing, study says
Despite findings from the Society
for Human Resource Management (SHRM) 2012 survey, "Background
Checking -- The Use of Credit Background Checks in Hiring Decisions," which
showed that most employers do not check credit history, bills are still being
introduced. The SHRM study showed that only 13 percent of all organizations
regularly check job candidate's credit histories prior to employment. More than
half do not bother to check a credit history at all, no matter the position.
"Fewer employers are using
background checks, and checks are often done for specific jobs or to comply
with the law," says Mark Schmit, SHRM's vice president of research, in a July
release accompanying the findings.
Demos's Traub counters that the way the SHRM survey questions
were phrased skewed the outcome of the study. One question asked respondents if
their organization had ever hired a job candidate despite a negative credit
report. "It sort of has been spun as that credit checks aren't weeding people
out," Traub said. "It just means at some point in their career they have hired
someone despite their bad credit."
According to the Demos 2013 report of employees, one in four
respondents said a prospective employer requested a credit check as part of a
job application. The study further asserts that one in 10 of the survey
respondents who were unemployed were not hired for a position because of
information in their credit reports.
Most Americans support bills prohibiting credit checks -- approximately
75 percent -- according to the Demos survey. While most states have not passed
legislation limiting employment credit checks, Traub is hopeful that Congress
will pass federal legislation addressing the issue in the coming years or that the
Equal Employment Opportunity Commission (EEOC) will issue guidance on
employment credit checks.
* Correction: As
originally published, this article reported nine states had passed
pre-employment credit checks. Nevada was the tenth state to pass a law limiting
employer credit checks, passing the law on May 23, 2013. See the CreditCards.com corrections policy.
See related: States stepping up to limit pre-employment credit checks
, 6 myths about credit report checks by employers
, Don't let bad credit keep you from landing a job
Published: June 26, 2013