Employers May Be Banned From Pulling Credit Reports if “Equal Employment for All Act” (HR.3149) Passes

A bill put forth last year in Congress may have a greater need now that the economy has remained sour for so long. Tough employment conditions can create a negative entry on a credit report and we don’t want that to hold people back from obtaining employment.

Representatives Steve Cohen (D-TN) and Luis Guitérrez (D-IL) introduced H.R. 3149, the “Equal Employment for All Act,” which would amend the “Fair Credit Reporting Act” (“FCRA”) to prevent employers from using consumer reports and credit checks in making employment decisions unless the position involves FDIC clearance, national security, or significant financial responsibilities.

The bill summary:

Equal Employment for All Act – Amends the Fair Credit Reporting Act to prohibit a current or prospective employer from using a consumer report or an investigative consumer report, or from causing one to be procured, for either employment purposes or for making an adverse action, if the report contains information that bears upon the consumer’s creditworthiness, credit standing, or credit capacity. Makes exceptions to such prohibition for employment: (1) which requires a national security or Federal Deposit Insurance Corporation (FDIC) clearance; (2) with a state or local government agency which otherwise requires use of a consumer report; or (3) in a supervisory, managerial, professional, or executive position at a financial institution.

According to a paper put out by Williams Mullen law firm the use of credit reports by employers that use credit reports in hiring decisions need to consider the impact on actions involving the Equal Employment Opportunity Commission (“EEOC”). The EEOC “has found that, because certain racial and ethnic groups tend to have more credit problems, employers’ use of consumer reports to make adverse employment decisions has a disparate adverse impact on these racial and ethnic groups.” – Source

The advice from Williams Mullen is, “Even if the bill does not pass, given the EEOC’s findings of racial and ethnic disparities in credit checks, employers’ use of consumer reports to make employment decisions could lead to a rise in adverse impact discrimination claims.”

See also  11 States Where Employers Can’t Check Your Credit

I’ve never been a fan of using credit reports for employment. There has been little to no correlation between work performance and credit reports. I once had an opportunity to corner a credit reporting provider VP and ask him why they kept pushing credit reports for employment purposes. His answer, “It lets us sell more credit reports.” At least he was honest.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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