Picture this scenario,
You lost your job, due to outsourcing, restructuring, or layoffs.
You burned through your savings trying to make ends meet while you search for work, but a bad economy and competition from hundreds if not thousands of other unemployed workers have made your job hunt last longer than 6 months with no end in sight.
But the bills, the bills don't stop coming, and while you do your best to cut down on things you use, that mortgage payment amount you owe becomes hard to reach and despite your best efforts, you fall behind.
Bill after bill, late fee after late fee takes its toll, and over time, your credit is ruined.
But that's okay right? The economy is picking up again, jobs are being added but for some reason every place you apply to never calls back.
To many Americans this is an all too familiar scenario that many are living in as I write.
The sad fact is that there are already two strikes against this person, the discrimination the long term unemployed face (people who have been unemployed for longer than 6 months), and a bad credit report.
Not to mention the fact that are still roughly 15 million Americans that are jobless, and many more working part time but are looking for full time work.
So three strikes.
For the people in this scenario, it's an out, and that's a huge problem.
I want to focus on employment discrimination for those with bad credit (for the purposes of keeping it real, I have to mention that employers cannot actually see your credit score). The problem is this: There are a lot of people looking for work, employers literally have hundreds of job applications to go through. An easy way to eliminate stacks of potential employees from the list is to first, eliminate the long term unemployed, and then eliminate those who have bad credit.
It's an employers market.
In a good economy people tend to turn a blind eye to this discrimination. Citing the fact that since there are so many jobs around that people in this situation must just be irresponsible and lazy.
But this attitude towards hardworking people who through no fault of their own have a bad credit report persists into hard economic times. Where there are layoffs and businesses going bankrupt or firing workers who then have nowhere else to go to pay their bills. Or if someone gets sick or injured and loses their job and acquires medical debts that they cannot pay.
According to a 2007 study in the American Journal of Medicine 62.1% of all bankruptcies are attributed to medical debt.
Bankruptcy really isn't the best thing to have on your credit report.
Neither are defaulted student loans, which attribute $76 Billion of the total 1 trillion dollars in total student loan debt.
Thankfully, there are eight states with laws on the books banning employers from using credit scores in their hiring decisions. And there have been less than successful attempts at federal legislation.
A bill introduced in 2009 called "H.R. 3149 Equal Employment for All Act" was the first attempt at stopping people from being discriminated against because of their credit. But it was essentially killed in committee through aggressive lobbying. Organizations such as the U.S. Chamber of Commerce, The Consumer Data Industry Association, and the Financial Services Roundtable opposed the bill, spending roughly $24 Million dollars in lobbying that was used to kill the resolution, versus the $2 Million used to support it. That is 9.8 times more money, no wonder it got crushed.
Some of that money went unsurprisingly to some of the members of the House Financial Services committee where the bill was being introduced, members like Randy Nuegebauer (R-TX) who received $26,050 in campaign contributions from Credit agencies and finance companies, Spencer Bachus (R-AL) who received $57,250 in contributions, Jeb Hensarling (R-TX) got a whopping $76,400 and, Michelle Bachmann (R-MN) received $16,350 in contributions. All of these committee members received campaign contributions from interest groups that opposed H.R. 3149. And it's not just Republicans, you go through the list and there are many Democrats that received campaign contributions from firms that fought this resolution.
This election cycle, TransUnion itself gave money to Tennessee Republican Bob Corker's campaign through a PAC as well as donating to President Barack Obama. Experian also gave nearly $250,000 to Republicans and nearly $80,000 to Democrats alone as well as spending nearly $500,000 on lobbying.
It's safe to say that some of that money will go to fighting a new bill called, H.R.321 sponsored by Steve Cohen (D-Tenn) which is this congress's version of the Equal Employment for All Act. It's currently being held up in committee as well and is looking like it will suffer the same fate as the bill before it.
During a 2010 hearing on H.R. 3149 Representative Nuegebauer actively argued against the proposed bill by saying:
"I just wanted to respond in that I think what is interesting is I think about 60 percent of the businesses in this country use credit reports as one of the tools that they use in making a final determination. So this is not like--evidently, there has been some reason to correlate that as a part of the screening process, that credit reports are being helpful. Otherwise, we wouldn't have such a large number of employers using that tool."
Interesting, but not true, in fact Mr Cohen debunked that whole argument with this:
"Eric Rosenberg with TransUnion said in a hearing in Oregon during sworn testimony that his company had zero statistical evidence to document that employees with bad credit checks are more likely to steal or commit fraud than workers with perfect credit. A study at Eastern Kentucky said the same thing, as highlighted in The Hill in an article this morning about these studies."
This is a clear case of needing to follow the money. These credit ratings agencies aggressively market businesses to use their services. So it's in their best interests to fight laws that would stop employers from using credit checks. If something like this were in place, TransUnion, Equifax and Experian would lose a lot of business. So they lobby the government, grease the palms of politicians and the poor guy who lost his job and fell behind on his mortgage gets screwed.
And for what?
Amy Traub of the Denver Post writes:
"There is little social science research showing a clear link between someone's personal consumer behavior and their performance on the job. In fact, the few studies that exist have found no correlation between personal credit reports and the propensity to commit a crime."
So employers will continue to be able to deny people work that would help them climb out of their financial hole, because of the fact that they're in a financial hole.
And sometimes, the information in a credit report is wrong, in fact consumer studies report that up to four out of five credit reports contain errors. Of course studies commissioned and underwritten by the three credit agencies dispute that.
This is wrong.
Given that 60% of employers look at credit reports as a factor in who they hire and the fact that I have old medical and school loan debt, the odds of me landing a job are low. Add in the fact that I am a student that has been unemployed for longer than six months and that's a recipe to stay jobless, something I hope to put an end to.
But people like me have little recourse because employers have no obligations to tell you why you did not get hired, so there are literally no protections from this kind of employment discrimination.
We need a solution, because for people in this situation, there is literally no way out.