When New York State Attorney General Eric T. Schneiderman announced that his office had cut a deal with the three big credit bureaus—Experian, Equifax and TransUnion—to improve the customer experience, the news shook the financial-services world into a frenzy.
“In today’s world, the consumer’s input is less important than the bank or collector’s input,” John Ulzheimer, an expert at CreditSesame, told the New York Times. “The attorney general’s settlement changes that.”
But for people of color, this is nothing to text home about. The untold, untouched and unaddressed silent crisis widely ignored by policymakers is how credit checks are used to discriminate against job seekers.
In fact, employer credit checks could be a major factor in chronic underemployment in the postrecession world or in the inability of capable and qualified folks to land a full-time gig. While most are too embarrassed or frustrated to say it, African Americans are the hardest hit by rampant poor credit, especially since many are still struggling to recover from the downsizing, foreclosures and unpaid bills of the Great Recession.
And you can’t get out of debt if you can’t get a job. As a result, the recent overhaul of credit bureaus may do little to solve the vicious cycle that confronts many African Americans, not until the system eliminates callous employer credit checks as job-suppression tools. While these newly announced changes seek to offer reprieve on unpaid medical bills and the error-correction process, they go nowhere near banning the sinister credit-check-for-employment practice.
“The most insidious and alarming part of the rise in credit-check use stems from its ostensibly race-neutral facade,” New America Foundation’s Hannah Emple explains. “People of color are more likely to have poor credit because of historical and contemporary forms of discrimination that limit educational, employment, borrowing and housing opportunities.”
Emple views credit-check-based employment decisions as a way of “operationalizing racial discrimination in a supposedly race-neutral way that will [unfortunately] stand up to legal scrutiny until we make it illegal.”
That’s what a 2012 Demos National Survey on Credit Card Debt found when it examined low- and middle-income households: One out of 10 unemployed workers reported credit checks kept them out of a job. That ratio is considerably higher for African Americans, among whom only a quarter of black households report credit scores of 700 or above.
Sure, the Fair Credit Reporting Act permits employment credit checks. But as Demos reports, “[C]redit reports were not designed as an employment-screening tool.”
And neither Congress nor the White House has taken any steps toward eliminating the widespread practice—although nearly half of all employers are doing it. There is grumbling that the Obama White House virtually ignored legislation introduced over the past few years that would put a cease-and-desist on the credit check as a barrier to employment.
“Using a job applicant’s credit history to deny employment is not fair because personal credit history is not an accurate predictor of job performance,” says Rep. Steve Cohen (D-Tenn.). Last session of Congress, Cohen snagged 30 sponsors for his Equal Employment for All Act (H.R. 645), which would prohibit employers from using credit checks except in cases of national security, Federal Deposit Insurance Corp. clearance, or major responsibility over employer and employee finances. He represents Tennessee’s largest and most predominantly black city: Memphis. According to a 2012 Experian survey of cities and their average credit scores for residents, Memphis is ranked in the bottom 10.
“Second chances in Hollywood and professional sports occur every day, but not for my constituents who are desperately looking for work,” added Cohen.
Rep. Maxine Waters (D-Calif.), ranking member on the House Financial Services Committee, is also worried about how much credit is wrecking second chances, especially since she’s representing one of California’s largest concentrations of people of color. Way ahead of the New York attorney general’s settlement, Waters introduced her Fair Credit Reporting Improvement Act of 2014 back in September. The bill would have reduced bad credit scores from seven to four years while also removing settled debts.
As long as the credit bureau industry has all sorts of skin in the political game, bills like those above won’t have much chance clearing committee. Experian leads the pack with nearly $3 million in combined campaign contributions and lobbying in Washington since 2013. Equifax is not too far behind at nearly half that amount.
In the end, as the Center for American Progress’ Joe Valenti argues, bad credit doesn’t translate into bad employee performance. “There are studies showing that if you are undergoing financial distress, you are going to be much more likely to pay off your debt,” Valenti explains. “If credit is keeping you out of a job, that’s only going to put you deeper and deeper into debt.”
Which is why the current system makes absolutely no sense. But then again, chattel slavery made sense to quite a few people 400 years ago, didn’t it?
Charles D. Ellison is a veteran political strategist and a contributing editor at The Root. He is also Washington correspondent for the Philadelphia Tribune, a frequent contributor to The Hill, the weekly Washington insider for WDAS-FM in Philadelphia and host of The Ellison Report, a weekly public-affairs magazine broadcast and podcast on WEAA 88.9 FM Baltimore. Follow him on Twitter.