Really, you’d think enough would be enough. Elizabeth Warren just got done creating a big kerfuffle when she talked about actually expanding Social Security benefits instead of arguing about how much to cut them. And now this madness! (Via email.)
Much of America – hard-working, bill-paying America – has a damaged credit rating.
There are a lot of different reasons, but a lot of people just caught a bad break. They got sick. Their husband left or their wife died. They lost their job.
Problems only got worse after the financial crisis. Shrinking home prices made it impossible to sell or refinance a home. People lost their small businesses. Smaller savings left people without much cushion to ride out the tough times. People missed a payment or went into debt.
Most people recognize that bad credit means they will have trouble borrowing money or they will pay more to borrow. But many don’t realize that a damaged credit rating can also block access to a job.
It was once thought that credit history would provide insight into someone’s character, and many companies routinely require credit reports from job applicants. But research has shown that an individual’s credit rating has little or no correlation with his ability to succeed at work. A bad credit rating is far more often the result of unexpected personal crisis or economic downturn than a reflection of someone’s abilities.
Today, along with Senators Blumenthal, Brown, Leahy, Markey, Shaheen, and Whitehouse, I am introducing a bill to stop employers from requiring prospective employees to disclose their credit history or disqualifying applicants based on a poor credit rating.
What?? Who is supposed to keep the good, hard-working Americans of Experian, TransUnion, and Equifax in business, if not employers looking for a reason to reject an otherwise qualified applicant who got a bad break? And what of the hapless corporations who might unwittingly hire someone who, because of a sick relative’s medical bills, missed a credit card payment or two? Oh, the humanity.
Let’s be honest: This is one more way the game is rigged against the middle class. A rich person who loses a job or gets divorced or faces a family illness is unlikely to suffer from a drop in his or her credit rating. But for millions of hard-working families, a hard personal blow translates into a hard financial blow that will show up for years in a credit report….
It’s been five years since the financial crisis, and it’s time for struggling families to stop paying the price for the recklessness on Wall Street and failed oversight in Washington that tanked our economy.
Oh, fer the love of Pete. Yes, yes, Wall Street broke the economy and plunged millions into financial hardship through no fault of their own, but that was all so 2008. Plus, how are non-wealthy Americans supposed to pull themselves up by their bootstraps if the federal government keeps giving them handouts like this? If you give a man a fish, he’ll eat for a day. But if you teach him to fish, he’ll eat until someone discovers that he has imperfect credit … wait, how does that one go?
Now seriously, folks: did we elect the best Senator in the United States, or what?
Yes indeed we did 🙂
And very glad to see Senator Markey has signed on as original co-sponsor.
#bestSenatedelegationinUS
Why shouldn’t an employer be allowed to check a credit rating for an applicant? “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,” Warren said in a press release.” (Boston.com). “Far more often” doesn’t mean “always” so presumably even the senator agrees that credit checks might be useful in some instances. But leaving that aside, many other things, for example a person’t inability to obtain a first-class education, are also, at least, “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.” So why not prohibit employers from considering a person’s education, also, by this argument.
In her press release, Warren wrote that “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.” I wonder how conclusive that research is, and what it even means to “be successful in the workplace.” But, again, leaving that to one side hiring decisions are always prospective: employers never have a guarantee that their employees will be successful.
Finally, Warren argues that
Assuming she is correct, it sounds like legislation should be filed to improve the credit report system rather than impose a broad new requirement on the hiring practices of businesses across the nation.
Count me unconvinced.
Basically, whether a person is well educated is likely to be relevant to whether they can do the job for which they’re under consideration. Whether they’ve missed a couple of credit card payments isn’t – what it is likely to do is unfairly tarnish that person’s character in the eyes of a potential employer. So there’s a significant potential for harm, and little potential for good.
As for fixing the credit report system, I’m all for that. But even an accurate credit report strikes me as of highly dubious relevance to most, if not all, job applications.
Basically it’s a massive invasion of privacy, particularly since I have no right to see what my potential employer is looking at. They have access to all your major purchase history, medical history, and financial status through one report. I ran thousands of credit reports for clients at the old bankruptcy mill I was employed at, and I can’t tell you how invasive it seemed on my end to do that.
Incidentally my boss checked all our credit histories before we were hired, refused to let us see the results, and would automatically terminate any employee who checked their own credit.
An education demonstrates that someone meets a reasonable prerequisite for most employment, demonstrates that someone is capable of business writing if its a liberal arts degree for an office position or a specific technical skill if it’s for a more technical position. If I was applying to 3M for an engineering position, they have a right to know I majored in history and took zero engineering classes. It bares on my direct performance there since I lack any skills the position requires. Whether I am down on my mortgage, how many trips to the hospital I took, or what car payments I have to make, or if my wife has a bad shoe fetish she is using my credit cards to pay-how is any of that relevant to my job performance?
It’s essentially another way to disqualify applicants-particularly low income ones. Here on the South Side of Chicago credit cashing with payday loans are the default banking options for most people, and it’s exactly how predatory lenders are able to prey on them. It’s shameful, but we live in a country where too many Americans are trapped in a cycle of poverty and laws like this are designed to level the playing field and open the middle class. I do give my old boss credit for one thing, he hated bankruptcy reform and loved that Elizabeth Warren fought it, and he claims she wrote the best book on consumer bankruptcy ever written. She get’s these issues.
But it’s not the one Warren made, so far as I can see. Did she argue it was a massive invasion of privacy elsewhere?
Quoth the honorable Sen Warren (from above)….
… Insofar as the only possible rationale for an invasion of privacy is also the only possible rationale for employers desiring to check credit: the search for blemishes upon someones character; the issue is very nearly the same in type, if not in scope. It’s the un-distilled essence of the argument: the word terrorists conjures up images of character so blemished, and disjoint from the normal, that it is purported to be blanket justification; the NSA fears, so much, the bad character of a few, it allows itself access to the character of all.
Now, to be sure, the employer is not concerned with terrorists, nor even with criminally bad character perhaps, but the difference is in scale not in type and so the fundamental invasion of privacy is the same. And Sen Warren, perhaps unwittingly, opens up an heretofore unexplored aspect on the issue: not solely the invasion of privacy but the follow on interpretation. The thesis is that, for the case of employers, there is no possible way that credit scores, according to Sen Warren, can accurately attest to the character of a person: it’s just another arbitrary data point that often gives cover to the potential employer for no good reason. The same is absolutely true for governmental invasion of privacy and that they can accurately attest to the character, and subsequent possibility of criminality, of an individual by way of a blanket privacy intrustion, is very much in doubt. If it wasn’t then we’d not have such a problem with anti-Muslim jingoism, in and out of government.
someone should be blacklisted from employment because of being late on a couple of payments to a predatory and usurious credit card industry in a time of rampant un- and under-employment, that’s pretty shitty. If ever there was a time when millions of decent people have fallen into this trap, it’s now.
The “errors are common” point is a pile-on argument. The main reason is that having a credit problem does not correlate with ability to do a job well. I can’t imagine why you’d think it would. Frankly shocking.
I think he was being cheeky and playing the devil’s advocate. Also I knew very little about most of this until it became my 9-5. I had no idea who the Unholy Trinity (Equifax, Experian, or TransUnion) were, how they operated, or how awful they are. Fun fact: If you file Chapter 7, pay all the attorney fees, take the credit counseling courses (which are a total joke and are owned by the credit card companies themselves) and have the debt ‘wiped out’-it’s still listed on the credit report until you write each board in writing to take it off referencing your case. You pay the postage, and even then they might not take it off (and therefore not actually recover your credit) for a few years or more.
Payday lenders are also some of the worst scum in existence, and I would hope somebody can finally wipe them out. They are really just loansharks with fancy suits and attorneys.
Yes, of course that is true. That’s why they conduct interviews, check references, look at experience, and do all the other stuff that they do to try to maximize the odds of a successful match.
But there is a bunch of stuff they’re not allowed to do. They can’t inquire into your religious beliefs, even if it would be a lot more convenient if you were willing to work past sundown on Fridays. They can’t refuse to hire you because you’re black, even though old Mr. Jones who has been working in the legal department for ages seems to have a problem with people of color and everything just goes much more smoothly if there are fewer encounters. And, says Senator Warren, they shouldn’t be allowed to check your credit report, because doing so is much more likely to give the potential employer an inaccurate impression of your “character” than it is to tell them something that’s actually relevant to how successful they’ll be on the job.
It seems fair enough to inquire into Senator Warren’s research, but if she has described the research accurately, then I have a hard time seeing how her proposal isn’t a good one.
So you’d be opposed to this bill if it could be demonstrated that there is an effective correlation? That’s an interesting point, because it suggests a difference between this issue and one of, say, race, which everyone agrees should not be allowed as a basis for discrimination. I wonder what the research she was talking about actually is? I couldn’t find any links on her website.
A study prepared by Demos (yes, the organization of which Senator Warren’s daughter is the Board Chair).
n/t
…is that it easily makes for a vicious cycle. If you don’t have a job it’s tough to pay bills. If you can’t pay your bills your credit suffers. If you have bad credit you struggle more to find a job. If you don’t have a job… (You get the idea.)
Also, I’ve never understood why private companies measure this and control access to it. Seems to me that maintaining your credit standings should be a government function and you should have access to your own info at any time for any reason for free, which BTW should not affect your credit rating for asking about it as I understand it sometimes does.
At least we have SOME Fourth Amendment protection against NSA spying.
You would actually INVITE and ENCOURAGE the government to collect CREDIT BUREAU information?
I’m speechless.
The government seems exactly the right entity to have this information, just like it holds your social security number, all kinds of identity information, which it has the resources to protect, etc. Makes more sense and I’m more comfortable with it than a private entity.
In my view, the government is exactly the WRONG entity to have this information.
I value my Fourth Amendment protections.
Surely the very first learning from the Snowden episode, whether one views him as hero or villain, is that the government DOES NOT have the resources to protect such information. Mr. Snowden was one of thousands (or tens of thousands) of low-level employees working for a government contractor.
The security of the state of South Carolina information system was breached two years ago, and SSN and tax information for EVERY South Carolina resident was distributed to the black-hats.
For all their problems, the three major credit bureaus have MUCH MUCH higher protections than the government.
I really am speechless. I really hope you’ll reconsider your posture about this — you really couldn’t be more mistaken about virtually every aspect of this crucial issue.
We desperately need to strengthen our Fourth Amendment protections. You would discard them altogether.
goes to the heart of why I think libertarians are flat-out wrong. The Bill of Rights is predicated upon the belief that individual citizens need to be protected from the government. But since 1791 a new threat to the individual citizen has arisen: the giant private corporation, with all its power.
Tom may be right on the tech issues. Christopher’s right on the undesirabilty of these private companies having this much power over our lives. I’d tend to leave it in private hands, but pass strict limits on the use and also require that people be able to access their own records more easily and that they know what the damn score is based on.
…the fourth amendment protections we do have apply against the government. I’m not sure they do against corporations. I’m not calling on the government to conduct more searches. I want it to be the repository of the credit score like the three companies are now without selling the information, including to me. They should give mine to me for nothing and tell everyone else no-can-do without darn good reason. No private company is going to just give me my credit score since they are in business after all. It’s similar logic I use against critics of “government health care”. I say better the government than a corporation. I see the government as able to be held more directly accountable.
Actually, pretty much anyone can obtain monthly reports on their FICO score and credit rating by purchasing products from one of the several identity protection companies. Like so much of today’s America, that option is only available to those who can afford it.
I’m not sure you appreciate just how much information is maintained by credit agencies and what goes into a FICO score. A government that has and holds the data used to generate a FICO score is a government that knows essentially everything about every resident.
You ARE calling on the government to conduct more searches — to do as you propose requires that EVERY change that is currently reported to the credit bureaus would be instead transmitted to the government. By what definition of “search” does that requirement not apply? Would the founding fathers have skipped the Fourth Amendment if the Crown had instead forced them to simply turn out their documents and possessions whenever any agent of the Crown passed by?
Surely you, like I, have watched the federal government dance, weave, fake, lie, and obfuscate about its data collection practices. Not just after the disclosures of Mr. Snowden, but since 9/11. Secret “courts”. Secret lists. Secret data centers. Warrents that nobody can see and nobody can talk about. Strong-arming of communications companies. Secret intrusions of network communications.
How can you POSSIBLY see all this and conclude that this government is “able to be held more directly accountable”?
I think fenway49 is on the right track. The fact is that we’ve already lost our privacy. This is the price we pay for all this “free” information that we now have (including this site — the fees paid by BMG don’t nearly cover the actual cost of delivering the bits).
As I write this, I realize that a new kind of “survivalist” might emerge from all this. Instead of fleeing to Montana with an arsenal of automatic weapons, this “neosurvivalist” will do business with cash and bitcoins, encrypt EVERY electronic aspect of their life (email, letters, images, everything), use VOIP on alternative peer-to-peer networks for communications, the whole works.
I don’t mean to sound like a Republican, but this is one area where competition can actually help. The technology available to the “neosurvivalist” exists already. As more people seek more privacy, the value of that technology will increase. At the end of the day, if the information is in private hands then there is ALWAYS the possibility of choosing a competitor. There is no competitor to the federal government.
both you and Christopher for a fantastic debate with points I never even considered on both sides.
This is why BlueMassGroup is one of the few blogs I still make time for every day without fail.
Thank you both.
I want what you describe to be available to everyone, not just those who can afford it. I only see the government as able to do that. There probably do need to be more reforms to maintain the right balance of transperancy so that each of us knows exactly what is happening with our own information, but not able to find out other people’s information. Just as we are talking about limits on who can see the data and for what purpose maybe there should also be more limits on what contributes to the score. The credit score is a measure of something and the constitution calls upon the federal government to set uniform weights and measures. The very fact that the three companies can give you three different scores shows that there is no standard of uniformity and it seems there should be. Right now there are many documents that say something like failure to pay in a timely fashion may be reported to the credit agencies. I guess replacing “credit agencies” with a designated federal agency doesn’t phase me as much as it does you and yes, your last couple of paragraphs do strike me as a bit paramoid.
I’d much rather see the government force credit agencies to make their reports more available than the wholesale nationalization your propose.
I find your argument about “weights and measures” missing the point entirely. There is no standard definition of “creditworthiness” as there is with, say “one meter”. The three different scores are more like getting three levels of internet service from three different providers. Hopefully you don’t want to nationalize internet access as well, using the same argument. A “weight” and a “measure” were very specific then and each remains so now.
You *really* don’t get how the credit agencies collect their data. It’s far more than “failure to pay in a timely fashion”. They collect as much salary information as they can, address changes, name changes, bank account changes, number of bank accounts, public documents … the list goes on and on and on. Many of the things the NSA is doing were pioneered by the credit agencies. Fortunately, the credit agencies DO have limits that the feds would not have. The credit agencies do NOT have unfettered access to tax return data. The credit agencies do NOT have unfettered access to social security and medicaid data.
“Paranoid”? Tell it to the residents of South Carolina.
Here is just one year-old report about the South Carolina breach. I note that the Governor cited the IRS as a “contributing factor”.
Here is an official report describing the breach.
One state … 3.8 million tax filers, 1.9 million dependents, 699,900 businesses, 3.3 million bank accounts, 5,000 credit card numbers.
I think you’ve dug yourself a hole, Christopher. I encourage to stop digging. At least perhaps pause a bit before throwing around characterizations like “paranoid”.
…and we hear about those affecting private companies as well, including just tonight on the news about information regarding Black Friday shoppers. Yes, things happen. I’m sure both public and private entities do their best to prevent them and both occasionally get breached anyway. Regarding your previous comment I did say that maybe we should limit what information goes in a credit report. You really aren’t complaining about the government knowing name and address changes, are you? Those are essentially public records anyway. Name changes appear in court documents and other government identification. I can go to Town Hall and get a residential address list for everyone in town for a small fee. I don’t know how or why your name or address has any effect on your creditworthiness, however, and if it does that should be changed. As for credit scores I guess I’m arguing that should be standardized. It makes no sense for one company to say my score is 672, another 690, and the third a real outlier at 402. Did the third company get info the other two didn’t, or did they make a mistake? To me that should be specifically measurable based on standardized rubrics.
I think you’re being naive. Just assume that they have access to anything that can possibly be found online, including online sites that have access to your credit scores and any sort of credit history.
I think you can ask for it, but other people asking for it (like retail stores issuing a charge card) can affect your rating.
Also, if you get a credit card cash advance in a casino, that goes on your credit rating.
per say financial advisors, accountants, professional investors
you would want to see that they have their own finances in order before managing yours… but I’m guessing there probably is some other regulatory requirement that handles this
what I’m saying I guess is does the industry matter? Like obviously a manual labor employee’s credit history doesn’t affect his/her performance but it could be a telling sign in some professions… maybe exceptions for certain things liek personal or medical problems… my CFA shouldn’t be thousands of dollars in debt because of some margin investing loss but if his wife has cancer then its an entirely different story
but I love that Senator Warren is willing to bring up the issue because its obviously incredibly unfair to some/many people and predatory lenders are the scum of the earth… I’m proud that my Senator fights for the most important issues facing our country (the financial industry)
But considering that we were running other peoples credit checks and advising them of their legal rights pre and post filing of bankruptcy over the phone, he figured he didn’t want any employers that would have a risk of becoming clients. Of course the best way for him to do that would’ve been to pay us significantly higher. And Christopher’s point on the cycle was spot on, we had a lot of repeat clients and while 1 out of 5 were pretty damn irresponsible and awful people to deal with over the phone, 4 out of 5 were decent hardworking folks who just got screwed by the system over and over.
Credit, Facebook wall, any Twitter posts, a general googling.
In a few years we’ll have “social credit” rating agencies that will score you on a harm to career scale. This will start out as a service to individuals, but then as it grows businesses will keep it afloat because they’ll want the data.
A few years after that, “health credit” agencies will arise. They’ll start off tracking preexisting conditions and then move to full data, dental records, any tests, and the like. Everything. You’ll not get a job and not know why, because predictive software says you’ll be dead in five years.
There will be some complaints that employers have no right to this, but once it starts with pilots and people who work with kids, the train is in motion and doesn’t stop.
And the NSA will capture all of this, of course, in the Utah Data Center.
Good luck!
Still think you aren’t using your privacy?
What do you mean by “using your privacy”? Did you by any chance mean “losing your privacy”?
During the NSA discussion, some people would say stuff like “Only the guilty have to worry,” as if privacy were an abstraction. Stuff like credit ratings bring home how real and important privacy is.
I wasn’t talking to anyone here. I was being rhetorical, broadcasting to the world if you will.
Senator Warren issued a very helpful one-page fact-sheet about the bill, which you can see here.
Here is a survey that indicates 47% of employers do credit checks.
I’m going to hazard a guess that 47% of employers equals something like 60% of jobs, maybe more (assuming companies that do checks are larger companies).
..but that has never stopped me before.
The industry that is promising the most new jobs in the near term is the casino industry. You cannot apply for a casino job without assenting to their right to see your credit report. I have tried.
The law that created gambling in our state said that one of its rationales was to “provide for new employment opportunities in all sectors of the economy, particularly opportunities for the unemployed.”
If casinos can get away with using credit checks to discriminate among their hires, then the unemployed workers for whose benefit the gambling law was enacted (in part) in the first place are going to be at a significant disadvantage.
and a good argument for passing Senator Warren’s bill before the casinos start hiring here.
Is there an argument that people who count cash or exercise fiduciary responsibility, or who, just generally, have jobs making embezzlement possible, really ought to have their credit checked?
I can certainly believe that the literature shows credit rating is not a useful proxy for competence or even responsibility, but, for some jobs, those may not be the most important attributes.
Dunno.
The credit rating is an aggregation of other sources and is used as a proxy for those other sources. Someone who has a history of embezzlement, credit fraud, bankruptcy, and so on will leave trail that can be discerned without access to their credit report.
While exemptions might be perfectly reasonable, I’m just suggesting that the information can be acquired elsewhere (although no doubt at increased cost to the prospective employer).
The Republicans and the Other Republicans (the Third Wayers) in Congress will block whatever fantasies that Difficult Woman has.
The financial industry is a very easy target right now; I wouldn’t assume much Dem opposition. Of course the House is GOP so it could very well be DOA there.
A lot of Dems, including quite a few progressives, betrayed consumers to ensure their donors stayed happy. Joe Biden was a particularly egregious promoter of that anti-consumer legislation (his state being home to more banks than people).
One requirement that could and should be added to each individual’s credit report is FULL DISCLOSURE comparable to but more expansive than HIPAA regulations, of EVERY disclosure of personal information to ANYONE, specifically including the government.
By “full disclosure” I mean who, what, when, and why — specifically. Enough information to pursue, prosecute, or publish.
This was, after all, one major impact of the Snowden disclosures — the reality of what information NSA was collecting and from whom. We should each be able to obtain that information from our credit reports.
Earlier this year, State Sen. Mike Barrett (D-Lexington) and State Rep. Liz Malia (D-Jamaica Plain) were inspired to file similar state legislation for the same reasons — many families have bad credit because of a job loss, health crisis or paying for basic necessities, such as food and utilities; credit reports don’t reliably predict job performance; on top of that, credit reports have a significant error rate.
Employers using credit reports creates a vicious cycle for people with bad credit.
Thanks to David for this post and to Sen. Warren for her leadership on the federal level. In Massachusetts, like the rest of this country, we need this type of legislation.
For those interested in the Massachusetts versions, please see:
https://malegislature.gov/Bills/188/Senate/S80 filed by Sen. Mike Barrett (D-Lexington)
https://malegislature.gov/Bills/188/House/H1744 filed by Rep. Liz Malia (D-Jamaica Plain)
-Brendan Berger
Communications Director
Office of State Sen. Mike Barrett