That’s none of your business: Proposed federal legislation would prohibit employers from obtaining employee credit scores

Senator Elizabeth Warren (D, Mass.) proposed a bill that prohibits prospective and current employers from using an employee’s credit history either for employment purposes, or to take an adverse employment action. The legislation currently enjoys support from a number of Democrats in both the United States Senate and House of Representatives.

The bill limits information that employers may obtain under the Fair Credit Reporting Act (“FCRA”). Under FCRA, employers have the ability to obtain a “consumer report.” These reports contain information regarding a person’s “credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living . . . .” In order to obtain information pursuant to FCRA, employers must comply with strict rules governing notice.

Senator Warren’s bill, proposed in December 2013, would change the information employers can obtain from a consumer report. The bill provides: “[A] prospective employer or current employer, may not use a consumer report or investigative consumer report, or cause a consumer report or investigative consumer report to be procured, with respect to any consumer where any information contained in the report bears on the consumer’s creditworthiness, credit standing, or credit capacity . . . ” (emphasis added).

At a minimum, the bill is clear that an employer would not be able to use credit information contained in a consumer report to make an employment decision, or to take an adverse employment action. The vague wording of the bill, however, could also mean that use of consumer reports is altogether prohibited.

Senator Warren’s bill contains only two limited exceptions to the prohibition on use of credit history. These exceptions are for positions where national security clearance is necessary, or where another law requires inquiry into an applicant’s credit history.

A similar bill was proposed in the House of Representatives in February 2013 by Congressman Steve Cohen (D, Tenn.). Like Senator Warren’s bill, Congressman Cohen’s bill provides that: “[A] prospective employer or current employer, may not use a consumer report or investigative consumer report, or cause a consumer report or investigative consumer report to be procured, with respect to any consumer where any information contained in the report bears on the consumer’s creditworthiness, credit standing, or credit capacity . . . .”

The operative language in both the Senate and House bills is the same. The House bill contains more exceptions, however. Specifically, the House bill would exempt from the credit score prohibition any job requiring national security or FDIC clearance; state or local government agencies; any supervisory, managerial, professional, or executive position at a financial institution; and any other position where a statute requires inquiry into the applicant’s credit history.

Both the Senate and House bills enjoy support among Democrats. No Republicans have announced support for either bill. With control divided between Democrats and Republicans in Congress, and controversial bills effectively requiring 60 votes to pass in the Senate, it seems unlikely that either bill will advance without some bipartisan support. Nevertheless, groups that lobby on behalf of employers have made their dissatisfaction with the bills known. At a minimum, one would hope that the prohibition is clarified to make clear whether it applies to all consumer reports, or merely credit history information.