In New York, your personal credit history is no longer any of your employer’s business.
From universal pre-kindergarten to paid sick days, New York City’s fight against inequality has grabbed national headlines. But recently, the nation’s largest city has quietly taken the lead in dismantling a far less obvious barrier to opportunity: the employment credit check. Thanks to a new law, businesses can no longer discriminate against employees and job seekers simply because they’re late paying bills.
The credit check ban is an important salvo against inequality. More often than not, poor credit is the result of bad luck and societal disadvantages, and is associated with unemployment, lack of health care, and medical debt. As a result of credit checks, someone who is out of work will find it more difficult to get another job, falling further behind on their bills in a vicious catch-22.
The problem is exacerbated in communities of color, which continue to endure the impact of racial discrimination in employment, education, and housing. Compounded by the fact that they have been targeted by predatory lenders for decades, these communities are far more likely to have poor credit. When credit checks are part of the hiring process, the same racial disparities that contribute to flawed credit translate into reduced chances at employment. Disadvantage snowballs, and inequality is further cemented into place. In this way, credit checks have the same effect as older and more recognizable forms of employment discrimination.
Despite court rulings and warnings by the Equal Employment Opportunity Commission that employment credit checks can have a discriminatory impact, nearly half of employers nationwide used credit checks to screen prospective employees in 2012. Credit checks are used for entry-level jobs in retail sales and building maintenance, high-level positions in finance and insurance, and everything between. Last year, a food-service worker at New York’s Madison Square Garden was fired her first day on the job because she allegedly had personal debts in collection. Apparently, if you can’t pay your bills, you can’t sell hot dogs.
This supposed link between credit and employee efficiency isn’t just illogical; it’s demonstrably untrue. Studies find that personal credit history fails to predict worker productivity and doesn’t correlate with workplace performance, even for high-profile positions in a financial-services company. In general, there is little evidence that credit checks are of any value to employers at all. Yet throughout the country, credit checks—and credit-based discrimination—continue.
That’s where New York City comes in. While states from California to Maryland have already taken action to restrict the use of credit checks in employment, many of these laws include gaping loopholes. For example, credit checks can be used for any position that includes access to cash or valuables, and for supervisory positions. As a result, discriminatory credit checks continue, locking qualified workers out of jobs they desperately need. NYC’s law, sponsored by City Councilman Brad Lander, prohibits credit discrimination for almost all jobs and positions the city as a national leader.
Other cities and states are already beginning to take notice. Connecticut’s House of Representatives passed a bipartisan bill in May to remove a significant loophole in their law, and the NYC law may give new momentum to federal efforts like Senator Elizabeth Warren’s Equal Employment for All Act, which would end credit-based discrimination throughout the country.
Ending this illegitimate and discriminatory barrier to employment nationwide will make our economy fairer for all of us.
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