Federal Bill Prohibiting Credit Checks on Employees, Job Applicants Introduced in Senate

  • December 19, 2013

A proposal to prohibit employers from using consumer credit reports “for employment purposes” or for making adverse employment decisions has been introduced in the Senate. The “Equal Employment for All Act” (S. 1837), a bill to amend the Fair Credit Reporting Act, was introduced by Senator Elizabeth Warren (D-Mass.) on December 17, 2013. It has six Democratic co-sponsors.

The bill would bar employers from requiring employees and potential employees to disclose their credit history for employment purposes. The bill states that the prohibition would apply “even if the consumer consents or otherwise authorizes the procurement or use of a consumer report for employment purposes or in connection with an adverse action with respect to such consumer.” 

Positions that require a national security clearance or “when otherwise required by law” are exempt from the prohibition.

“A bad credit rating is far more often the result of unexpected medical costs, unemployment, economic downturns, or other bad breaks than it is a reflection on an individual’s character or abilities,” Senator Warren said in a press release. “It was previously thought that credit history may provide insight into an individual’s character, but research has shown that an individual’s credit rating has little to no correlation with his or her ability to be successful in the workplace,” she continued. 

Many employers use credit checks in targeted circumstances, as in hiring a Chief Financial Officer or workers with access to credit cards or cash. The Equal Employment Opportunity Commission is considering a guidance document further restricting the use of credit information in the employment context on the premise that credit checks tend to adversely affect minorities and women more than other individuals. In addition, ten states (California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington) have enacted limits on employers’ use of credit information in employment and similar bills are pending in other states.

For additional information on this and other employment-related legislation or background checks, please contact the Jackson Lewis attorney with whom you regularly work.

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