TransUnion asked to stop selling credit reports to employers

If you can't get hired for a job because of lousy credit, a coalition of advocacy groups is fighting for your right to work.  

A collection of 27 consumer advocacy, civil rights and community groups, as well as labor unions and concerned citizens, have joined to demand that credit bureau TransUnion end its sale of consumer credit reports to potential employers. Some companies review credit reports as a way to predict who will be a responsible and trustworthy worker. According to the Society for Human Resource Management (SHRM), 13 percent of employers check the credit of all job applicants, while 47 percent of employers conduct checks for select applicants.

That's a problem, the coalition argues."Families across the country are facing the greatest economic crisis since the Great Depression. Many Americans have been out of work for over a year now, with increasing numbers turning to foreclosure and bankruptcy as unemployment checks fail to cover their families' basic needs," the coalition says in a letter posted online.

TransUnion asked to stop selling credit reports to employers

"Yet TransUnion, the world's largest privately held credit reporting company, promotes credit history as a measure of character and suitability for employment," the letter says, adding that the credit bureau has led the lobbying effort to prevent states from restricting the practice.

The groups say TransUnion was singled out because as a privately held company, it can adjust its policies more easily than its competitors can. However, the other two major U.S. credit bureaus -- Equifax and Experian -- also sell credit reports to employers.

The groups argue that consumers' poor credit shouldn't keep them from getting hired. According to Ed Mierzwinski, consumer program director for the U.S. PIRG consumer advocacy group, "even the credit bureaus cannot prove a relationship between job performance and credit reports. So, civil rights, labor and consumer groups have decided that it's a good time to coordinate our shared long-standing efforts to rein in the use of credit reports for employment purposes," Mierzwinski says.

But the credit bureau disagrees. TransUnion says that employers understand the financial impact of being unemployed, so credit reports are used to reveal how a potential hire acted prior to a job loss. "What employers are interested in is whether an individual acted prudently while he or she was employed," TransUnion spokesman Dave Blumberg says in an email. "A pre-employment report is one tool to help them assess that." He adds that a review of the applicant's credit report will confirm that he or she ran into difficulty making payments only due to a layoff during the recession, allowing employers to make a decision based on longer-term behavior.

"TransUnion understands and empathizes with the many Americans who have experienced job loss during the recent recession," Blumberg says.

The bureau emphasizes that credit reports aren't used to screen all job candidates. Instead, TransUnion says these reports are typically used to select final candidates from an already narrowed pool of possible hires. Credit reports are frequently used when hiring workers who will have access to funds, trade secrets, clients' money and sensitive personal information. They are also frequently used by government agencies, such as law enforcement, TransUnion says.

"In these situations, employers have clearly illustrated that the use of credit reports holds value for them, right alongside the personal interview, review of education history, resume, job skills, references, standardized testing and other information that they use as part of the pre-employment process," Blumberg says.

However, critics say that process is anything but fair. "It's still being used to make a hiring decision," says Beth Givens, director with the Privacy Rights Clearinghouse. 

"They are using credit reports to make a character judgment, and I think that's just flat-out wrong," she says. Givens says there are plenty of reasons, aside from job loss, that a consumer may have bad credit, including health, marital or family problems. 

Consumer advocates say some U.S. workers are hurt more than others by the practice, according to the coalition's letter, since the use of credit in hiring decisions discriminates against black and Hispanic workers. The coalition refers to a study showing that the average credit score of blacks and Latinos is roughly 5 percent to 35 percent lower than that of whites. "The Equal Employment Opportunity Commission has expressed concern that credit checks in employment may violate the Civil Rights Act, and has sued two employers over it," the letter says.

TransUnion notes that federal law protects consumers when credit reports are used in hiring decisions. "For instance, consumers must give their written permission before an employer can access their credit report. Employment may not be denied on the basis of bankruptcy. Additionally, consumers cannot be denied a job based on information in a credit report until they have been given a copy of their credit report and provided with their rights under federal law," Blumberg says.

For consumer advocates, those laws aren't enough: They say the hiring process itself needs to change. "The only way to help people get back on track is for them to get new jobs. We shouldn't block people from getting jobs they are qualified for because they had an economic misfortune such as losing a job or a health issue that caused them to lose a job," says Linda Sherry, director of national priorities for Consumer Action.

"There are much better ways to assess someone for hiring purposes -- calling former employers and personal references, for instance," Sherry says.

See related: Don't let bad credit keep you from landing a job, States stepping up to limit pre-employment credit checks, Fed: Credit companies admit profiling credit card users 

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Updated: 10-20-2018