The credit system in the country almost impacts every American live. Certainly, with the way the credit “monopoly” in the country is running things, many have experienced a mix of financial and emotional distress mainly resulting from erroneous information on their consumer credit reports. In the recent past, there has been an emergency of headlines making their way into news outlets about how certain people cannot refinance their mortgage. I’m thinking, how about the people who their stories cannot make it to the news outlets? The fact is, most people are suffering but in silence. While most stories do not disclose the exact reasons, I’m quite sure that being a parent you must be worried for your kids because I am, the future of our kids hangs in the balance if we do not do something to restore sanity in the credit system.
Our country’s credit and reporting system is not fair. And it doesn’t make sense. One of the reasons I strongly support what Congresswoman Maxine Waters is doing. Let’s do a quick exercise;
- Do you know what a credit score is?
- Do you know what factors weigh your credit score?
- Do you know how the credit score is arrived at?
- Do you know what to do if you find erroneous information on your report?
If you are honest enough, probably you only got the first question or none. That’s the situation with most people. We have been blindly following something that we completely know nothing about. The result, American people have wasted a lot of opportunities and resources in the hands of the demagogues of economic opportunists, and the people who suffer the most are the minorities.
H.R. 3614 The Restricting Use of Credit Checks for Employment Decision Act is a bill that was proposed by Rep. AI Lawson in a bid to ban the use of credit information for most employment decisions, except when required by the law of for National Security Clearance. Over the past few years, restrictions with regards to the use of credit checks by the employers have been passed in various states and municipal levels and the central government has now indicated its interests and concerns of potential discriminatory impact of the use of these credit checks.
I have never found the essence of asking job candidates about their financial background and I am very happy with this bill because it also prohibits managers from asking questions about the applicant’s financial position in the past or the credit history on job applications. While the opponents of bill argue that the information on financial status of a person is a good indicator of a person’s judgment and potential risk to the organization especially in certain position that involves finances and accounting, the bill’s proponents say that hiring managers probing into people’s financial situation blocks upward mobility, disproportionately affects the minority job seekers and can be an invasion of privacy.
Checking people’s financial background harms workers
Conducting a background check on every candidate is an essential part of the selection process. I am a manager and I do background checks on my employees and the reason for this is that it is the most accurate way to verify the credentials of the candidate. More to that, a background check is a way to allow hiring managers to learn about any less than the desirable information that most of the candidates are reluctant to share in their resumes. However, most hiring managers take the process too far, and it now becomes like an investigation rather than a simple background check and I think that is what The Restricting Use of Credit Checks for Employment Decisions Act is trying to resolve.
I don’t see this bill as a single entity but as a multi-bill overhaul of the credit reporting industry lead by Maxine Waters. In a statement, Waters said that she had been very concerned with the credit system in the country especially the way the credit checks are done for employment purposes because in most cases, you will find very qualified candidates not getting the job because of the inaccuracy in reporting or due to financial hardship from years ago. “…An individual’s credit history has been shown not to predict their job performance,” she said. “Nevertheless, credit information is increasingly used by employers. People who have been unemployed for an extended period of time, and whose credit standing has been damaged because they were unable to pay their bills, cannot secure a new job to end their financial distress because prospective employers conduct credit checks as part of an application process.”
The requirement by employers to conduct a background financial check is absurd. Workers who lose their jobs are very likely to fall behind in their bills because of the lack of incomes. Now imagine a scenario where a credit report is used against them, obviously, they will not get any job and they end up being shut out of the job market because they are behind on their bills which leads to a financial distress- a spiral effect where the impact of unemployment weighs heavily on their debts and thus, it becomes harder for them to get a job.
I think the credit system in our country has missed the very essence why the credit scores were developed which is to predict the likelihood of a person missing a loan payment and not whether the person will steal from the workplace. Democrats on the committee cited data that clearly showed how the credit checks in the hiring process can be discriminatory against people of color and Latino job applicants. There are numerous studies confirming that black ad Latino households tend, on average, to have lower credit scores than the whites.
“The growing use of credit checks, therefore, may disproportionately screen otherwise qualified racial and ethnic minorities out of jobs, leading to discriminatory hiring practices,” Waters said.
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“Committee Democrats Work to Reform Broken Credit Reporting System.” Financial Services Committee, 11 July 2019, financialservices.house.gov/news/documentsingle.aspx?DocumentID=404065. Accessed 21 July 2019.
“How to Perform a Background Check of a Job Candidate.” Cleverism, 19 Feb. 2018, www.cleverism.com/how-to-perform-background-check-job-candidate/. Accessed 21 July 2019.
“Overhauling Our Nation’s Broken Consumer Reporting System | Financial Services Committee.” House.Gov, 2016, financialservices.house.gov/issues/reforming-our-nation-s-credit-scoring-reporting-practices.htm. Accessed 21 July 2019.
“Using Credit Histories in Employment Decisions: An Overview of Divergent State & Local Requirements | Employment Law Lookout.” Employment Law Lookout, 12 June 2018, www.laborandemploymentlawcounsel.com/2018/06/using-credit-histories-in-employment-decisions-an-overview-of-divergent-state-local-requirements/. Accessed 21 July 2019.