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Cohen Introduces Bill to Prevent Employers from Using Credit Checks to Hire or Fire Employees

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Location: Washington, DC

Congressman Steve Cohen (TN-09) today introduced legislation that would prohibit employers from using credit checks and bankruptcy filings as part of the hiring process.

"Using a job applicant's credit history to deny employment is not fair because personal credit history is not an accurate predictor of job performance," said Congressman Cohen, who noted how the Commercial Appeal recently reported that no metro area in America has a consumer credit score lower than Greater Memphis' 638 average according to the TransUnion rating agency. "We should be doing everything in our power to help people find jobs during these tough economic times -- not hinder them."

Congressman Cohen authored the Equal Employment for All Act to prohibit employers from using credit checks as part of the hiring process unless the position sought involves national security, FDIC clearance or tremendous financial responsibility.

According to Society for Human Resource Management, the number of U.S. employers conducting pre-employment credit checks is on the rise, up from 36 percent to 43 percent. However, unless the job position involves significant financial responsibility, a perspective employee's credit score has not proven to be an accurate predictor of future job performance.

The Equal Employment Opportunity Commission (EEOC) has repeatedly acknowledged that the use of credit checks to screen out job applicants may disproportionately impact women and minorities, and therefore could be evidence of workplace bias.

This practice also poses a significant barrier to finding employment during tough economic times. To pay down their debt millions of Americans need a job, but they can't get hired because of their debt.

The Equal Employment for All Act would 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.

The legislation would provide several exceptions to permit a consumer credit report: (1) when the consumer applies for or currently holds employment that requires national security or FDIC clearance; (2) when the consumer applies for, or currently holds, employment with a state or local government agency which otherwise requires use of a consumer report; (3) when the consumer applies for, or currently holds, a supervisory, managerial, professional or executive position at a financial institution; (4) where otherwise required by law.

Congressman Cohen also today introduced the Bankruptcy Nondiscrimination Enhancement Act which would strengthen the Bankruptcy Code's nondiscrimination provision with respect to private employers (Section 525(b) of the Bankruptcy Code.) Currently, that provision prohibits private employers from terminating the employment or discriminating with respect to the employment of a debtor or bankrupt "solely" because that person is or was a debtor or bankrupt, has been insolvent before commencing a bankruptcy case or during a case before the grant or denial of discharge, or has not paid a debt that is dischargeable or was discharged in bankruptcy.

Under this language, private employers may still fire or otherwise discriminate against someone who has filed for bankruptcy so long as bankruptcy was not the sole reason for the decision. Also, employers may refuse to hire someone even solely on the basis of that person's bankruptcy filing. The Cohen measure would improve the nondiscrimination provision in two ways: (1) by striking the word "solely" so that any consideration of bankruptcy as the basis for an adverse employment decision would be prohibited; and (2) by explicitly adding denial of employment as a prohibited act.


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