New York Mayor Bill de Blasio signed a law that employers, except in limited situations, are no longer allowed to check credit histories when reviewing a job candidate’s application. (Mary Altaffer/AP)
Oooh, New York. If you can make it there, you can make it anywhere; that’s what they say.
That’s a little spin on Alicia Keys’s “Empire State of Mind (Part II)” and its nod to Frank Sinatra. For job seekers in the Big Apple, those words will really hit home now. Effective Sept. 3, employers, except in limited situations, are no longer allowed to check credit histories.
“Every New Yorker applying for a job deserves a fair shot — and we are committed to protecting the rights of our workers and making sure that every New Yorker has the opportunity to succeed,” Mayor Bill de Blasio said.
The law is being heralded nationwide as an example to follow. Federal law allows employment credit checks under the Fair Credit Reporting Act. It requires employers to get an applicant’s or employee’s permission before pulling his or her history. But really, if you want the job, how likely are you to refuse such a request?
Still, you have to wonder: How does the fact that you once couldn’t pay your credit card bill correlate to job performance? Or if someone is a poor money manager, does that mean she’s more likely to commit fraud?
We don’t really know the answers to those questions, yet many employers are allowed to screen folks on the assumption that their character is related to their credit history. As I’ve seen in my own work with people, a bad credit record can be the result of a host of problems not linked to irresponsible financial behavior. The think tank Demos and other advocates have found that many people’s credit was brought down by periods of unemployment or medical debt. Some were the victims of predatory lending practices.
[The debt dialogue must be turned on its head.]
Consumer advocacy groups have long complained that there is no link between bad credit and job performance. They argue that such checks lead to discriminatory hiring.
New York’s law is one of the toughest enacted on this issue, said Amy Traub, a policy analyst for Demos. States and local governments can make their own laws that further restrict employers except in cases where a credit check is required under federal law, she said.
There are efforts in Congress to prohibit employers from requiring potential employees to disclose their credit history as part of the job application process. Eleven states limit employers’ access to or use of applicants’ credit information — California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington. And 28 bills are pending in statehouses across the nation.
“New York’s law is the strongest in the country because it doesn’t include most of the unjustified exemptions found in other state laws,” Traub said.
Illinois law permits credit checks in hiring for positions where job duties include having unsupervised access to $2,500 in cash or assets. That “would include virtually any position in retail, maintenance, tech support and, likely, food service,” Traub said. “California’s law allows credit checks for any position described as ‘managerial,’ putting a ceiling on how far anyone with flawed credit might advance in their career.”
In a 2013 Demos report titled “Discredited: How Employment Credit Checks Keep Qualified Workers Out of a Job,” Traub made a great case to cease using credit as a job-screening tool.
“Despite their prevalence, little is known about what credit checks actually reveal to employers, what the consequences are for job applicants, or employment credit checks’ overall impact on our society,” she wrote. “Credit reports were not designed as an employment screening tool. Instead, they were developed as a means for lenders to evaluate whether a would-be borrower would be a good credit risk.”
I hope what’s happened in New York will create a precedent. Maybe it will inspire Congress to act so that there’s one standard.
