Possible Amendments to the Fair Credit Reporting Act Would Prohibit the Use of Consumer Reports for Employment Decisions

Potential amendments to the Fair Credit Reporting Act (FCRA) would prohibit the use of consumer reports for employment decisions. Senator Elizabeth Warren (D-MA) recently introduced S. 1837 entitled “Equal Employment for All Act of 2013”. The bill would amend the FCRA to prohibit employers from using a consumer report or investigative consumer report for employment purposes regarding existing and prospective employees, or causing such a report to be procured, “where any information contained in the report bears on the consumer’s creditworthiness, credit standing, or credit capacity”. The prohibition would apply regardless of whether the employee or prospective employee had consented to the use of the report. The bill contains an exception that would allow an employer to use a credit report when the consumer currently holds or is applying for employment that requires national security clearance; or when “otherwise required by law”. A similar bill was introduced in the House of Representatives in February of this year. Representative Steve Cohen’s (D-TN) bill, H.R. 645, has the same name as Senator Warren’s bill. It is very close in content to Senator Warren’s bill, although it would allow the following exceptions: a) “employment that requires national security and FDIC clearance”; b) “employment with State or local government agency which otherwise requires use of a consumer report”; c) “supervisory, managerial, professional, or executive position at a financial institution”; d) “when otherwise required by law.”

It is expected that the Equal Employment Opportunity Commission (EEOC) will endorse Senator Warren’s bill since the organization’s goals align with the goals of the bill. As stated in its Strategic Enforcement Plan, the EEOC is dedicated to eliminating barriers in hiring and recruitment by aiming to extinguish discrimination in hiring practices.

If passed into law as currently drafted, these bills would create enormous practical problems, compliance difficulties and potential legal liabilities for employers throughout the nation. First, many employers have a legitimate reason to not hire people with credit problems. For example, an employer understandably would not want to hire a person who was being pursued by creditors for a position where they could embezzle from the company. As amended by the bills the FCRA would take this right away. Further, many employers use consumer reports to guard against employing criminals. However, because the existence of a criminal record in a consumer report could easily be said to have a bearing on an applicant’s “creditworthiness, credit standing, or credit capacity”, employers could no longer do so without violating the FCRA. Given these problems, employers and credit reporting agencies with an interest in protecting their right to hire people without credit problems and/or criminal records are urged to contact their congressional representatives to voice their objections to the bills.

For more information on these bills or the Fair Credit Reporting Act in general, please contact Joseph Messer at jmesser@messerstrickler.com, or by calling Joe at (312) 334-3440. Joe has extensive experience in FCRA compliance and litigation, and has been presented at various conferences and forums on FCRA and other consumer laws.