Restricting Credit Checks for Employment Decisions Act
This bill generally prohibits a consumer reporting agency from providing a consumer's credit information for employment purposes, unless otherwise required by law or for a national security investigation.
[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3614 Introduced in House (IH)]
<DOC>
116th CONGRESS
1st Session
H. R. 3614
To amend the Fair Credit Reporting Act to ban the use of credit
information for most employment decisions, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
July 2, 2019
Mr. Lawson of Florida introduced the following bill; which was referred
to the Committee on Financial Services
_______________________________________________________________________
A BILL
To amend the Fair Credit Reporting Act to ban the use of credit
information for most employment decisions, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Restricting Credit Checks for
Employment Decisions Act''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) The use of credit reports as a factor in making hiring
decisions has been found to be prevalent in a diverse array of
occupations, and is not limited to certain high-level
management or executive positions.
(2) According to the California Labor Federation, only 25
percent of employers researched the credit history of job
applicants in 1998. However, this practice had increased to 43
percent by 2006 and to 60 percent by 2011.
(3) A study titled ``Do Job Applicant Credit Histories
Predict Job Performance Appraisal Ratings or Termination
Decisions?'', published in 2012, found that, while credit
history might conceptually measure a person's level of
responsibility, ability to meet deadlines, dependability, or
integrity, it does not, in practice, actually predict an
employee's performance or likelihood to quit. Credit reports
contain many inaccuracies and credit history can be
contaminated by events that are sometimes outside a person's
control, such as a sudden medical expense after an accident or
the loss of a job during an economic downturn. The study found
that there is no benefit from using credit history to predict
job performance or turnover.
(4) Despite the absence of data showing a correlation
between job performance and credit-worthiness, employers
continue to use credit checks as a proxy for assessing
character and integrity. According to a 2012 Society for Human
Resource Management survey, organizations indicated that they
used credit checks on job candidates primarily to reduce or
prevent theft and embezzlement and to minimize legal liability
for negligent hiring.
(5) The use of credit checks for employment purposes
creates a true ``catch-22'' for unemployed people with impaired
credit. For example, the financial hardship caused by losing a
job may cause some unemployed individuals to make late or
partial payments on their bills, but their poor credit standing
caused by this negative information on their consumer report
can also impede their chances of obtaining a new job to end
their financial distress.
(6) A September 2014 report by the New York City Council's
Committee on Civil Rights noted that, for those who have been
unemployed for an extended period of time and whose credit has
suffered as they fell behind on bills, the use of credit
reports in the hiring process can exacerbate and perpetuate an
already precarious situation.
(7) In a March 2013 Demos report titled ``Discredited: How
Employment Credit Checks Keep Out Qualified Workers Out of a
Job'', one in four survey participants who were unemployed said
that a potential employer had requested to check their credit
report as part of a job application. Among job applicants with
blemished credit histories in the survey, one in seven had been
told that they were not being hired because of their credit
history.
(8) While job applicants must give prior approval for a
prospective employer to pull their credit reports under the
FCRA, this authorization, as a practical matter, does not
constitute an effective consumer protection because an employer
may reject any job applicant who refuses a credit check.
(9) Some negative information on a report may stem from
uncontrollable circumstances, or significant life events in a
consumer's life, such as a medical crisis or a divorce. Demos
found that poor credit is associated with household
unemployment, lack of health coverage, and medical debt, which
are factors that reflect economic conditions in the country and
personal misfortune that have little relationship with how well
a job applicant would perform at work.
(10) In October 2011, FICO noted that from 2008 to 2009
approximately 50 million people experienced a 20-point drop in
their credit scores and about 21 million saw their scores
decline by more than 50 points. While the Great Recession
reduced many consumers' credit scores due to foreclosures and
other financial hardships, the financial crisis had a
particularly harsh impact on African Americans and Latinos, as
racial and ethnic minorities and communities of color were
frequently targeted by predatory mortgage lenders who steered
borrowers into high-cost subprime loans, even when these
borrowers would have qualified for less costly prime credit.
(11) A May 2006 Brookings Institution report titled
``Credit Scores, Reports, and Getting Ahead in America'' found
that counties with a relatively higher proportion of racial and
ethnic minorities in the United States tended to have lower
credit scores compared with counties that had a lower
concentration of communities of color.
(12) Studies have consistently found that African American
and Latino households tend, on average, to have lower credit
scores than White households. The growing use of credit checks,
therefore, may disproportionately screen otherwise qualified
racial and ethnic minorities out of jobs, leading to
discriminatory hiring practices, and further exacerbating the
trend where unemployment for African American and Latino
communities is elevated well above the rate of Whites.
(13) A 2012 Demos survey found that 65 percent of White
respondents reported having good or excellent credit scores
while over half of African American households reported only
having fair or bad credit.
SEC. 3. BANS THE USE OF CREDIT INFORMATION FOR MOST EMPLOYMENT
DECISIONS.
(a) In General.--Section 604 of the Fair Credit Reporting Act (15
U.S.C. 1681b) is amended--
(1) in subsection (a)(3)(B), by inserting ``, subject to
the requirements of subsection (b)'' after ``purposes''; and
(2) in subsection (b)--
(A) in paragraph (1)--
(i) by amending the paragraph heading to
read as follows: ``Use of Consumer Reports for
Employment Purposes'';
(ii) in subparagraph (A), by redesignating
clauses (i) and (ii) as subclauses (I) and
(II), respectively (and conforming the margins
accordingly);
(iii) by redesignating subparagraphs (A)
and (B) as clauses (i) and (ii), respectively
(and conforming the margins accordingly);
(iv) by striking the period at the end of
clause (ii) (as so redesignated) and inserting
``; and'';
(v) by striking ``agency may furnish'' and
inserting ``agency--
``(A) may furnish''; and
(vi) by adding at the end the following new
subparagraph:
``(B) except as provided in paragraph (5), may not
furnish a consumer report with respect to any consumer
in which any information contained in the report bears
on the consumer's creditworthiness, credit standing, or
credit capacity.''; and
(B) by adding at the end the following new
paragraphs:
``(5) Requirements for consumer reports bearing on the
consumer's creditworthiness, credit standing, or credit
capacity.--
``(A) In general.--A person may use a consumer
report with respect to any consumer in which any
information contained in the report bears on the
consumer's creditworthiness, credit standing, or credit
capacity only if--
``(i) either--
``(I) the person is required to
obtain the report by a Federal, State,
or local law; or
``(II) the information contained in
the report is being used with respect
to a national security investigation
(as defined in paragraph (4)(D));
``(ii) none of the cost associated with
obtaining the consumer report will be passed on
to the consumer to whom the report relates; and
``(iii) the information contained in the
consumer report will not be disclosed to any
other person other than--
``(I) in an aggregate format that
protects a consumer's personally
identifiable information; or
``(II) as may be necessary to
comply with any applicable Federal,
State, or local equal employment
opportunity law or regulation.
``(B) Disclosures.--A person who procures, or
causes to be procured, a consumer report described in
subparagraph (A) for employment purposes shall, in the
disclosure made pursuant to paragraph (2), include--
``(i) an explanation that a consumer report
is being obtained for employment purposes;
``(ii) the reasons for obtaining such a
report; and
``(iii) the citation to the applicable
Federal, State, or local law or regulation
described in subparagraph (A)(i)(I).
``(C) Adverse actions.--In using a consumer report
described in subparagraph (A) for employment purposes
and before taking an adverse action based in whole or
in part on the report, the person intending to take
such adverse action shall, in addition to the
information described in paragraph (3), provide to the
consumer to whom the report relates--
``(i) the name, address, and telephone
number of the consumer reporting agency that
furnished the report (including, for a consumer
reporting agency that compiles and maintains
files on consumers on a nationwide basis, a
toll-free telephone number established by such
agency);
``(ii) the date on which the report was
furnished; and
``(iii) the specific factors from the
report upon which the adverse action (as
defined in section 603(k)(1)(B)(ii)) was based.
``(D) National security investigations.--The
requirements of paragraph (4) shall apply to a consumer
report described under subparagraph (A).
``(E) Non-circumvention.--With respect to a
consumer report in which any information contained in
the report bears on the consumer's creditworthiness,
credit standing, or credit capacity, if a person is
prohibited from using the consumer report pursuant to
subparagraph (A), such person may not, directly or
indirectly, either orally or in writing, require,
request, suggest, or cause any employee or prospective
employee to submit such information to the person as a
condition of employment.
``(F) Non-waiver.--A consumer may not waive the
requirements of this paragraph with respect to a
consumer report.
``(6) Rule of construction.--Nothing in this subsection
shall be construed to require a consumer reporting agency to
prevent a Federal, State, or local law enforcement agency from
accessing information in a consumer report to which the law
enforcement agency could otherwise obtain access.''.
(b) Technical Amendment.--The Fair Credit Reporting Act (15 U.S.C.
1681 et seq.) is amended by striking ``section 604(b)(4)(E)(i)'' each
place such term appears and inserting ``section 604(b)(4)(D)(i)''.
(c) Rulemaking.--Not later than the end of the 2-year period
beginning on the date of the enactment of this Act, the Bureau of
Consumer Financial Protection shall issue final rules to implement the
amendments made by this Act.
(d) Effective Date.--The amendments made by this section shall take
effect 2 years after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Financial Services.
Committee Consideration and Mark-up Session Held.
Ordered to be Reported (Amended) by the Yeas and Nays: 32 - 26.
Reported (Amended) by the Committee on Financial Services. H. Rept. 116-305.
Reported (Amended) by the Committee on Financial Services. H. Rept. 116-305.
Placed on the Union Calendar, Calendar No. 246.
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