The bill is causing concern among businesses, who say they have valid reasons for wanting to know whether someone working for them has had financial problems.
BOSTON -- The Massachusetts Senate will consider a bill on Thursday that would prohibit employers from doing credit checks on potential employees. The bill is causing concern among employers, who say they have valid reasons for wanting to know whether someone working for them has had financial problems.
"Banks want to ensure their customers' funds and information is kept safe, and they don't want to end up in a situation where they have an employee who does something that could compromise that," said Jon Skarin, senior vice president of the Massachusetts Bankers Association.
The bill, S.2394, was sponsored by State Sen. Michael Barrett, D-Lexington, vice chairman of the Joint Committee on Labor and Workforce Development. It would prohibit employers from requesting a credit report for a job applicant or employee in order to make decisions related to employment, such as hiring, firing or promotions.
There are exceptions in cases where the credit report is required by federal or state law; when an employee is applying for or holding an executive or managerial position at a financial institution; or is applying for a job that requires national security clearance. There would also be an exception for jobs that involve significant financial responsibility, including authority over funds worth more than $10,000 or authority to enter into financial agreements valued at $10,000 or more. To request a credit report in those cases, the employer would have to get a job applicant's written consent and let the person dispute the report's accuracy.
Currently, at least 10 states have laws limiting an employer's ability to request an employee or job applicant's credit score. Most laws have some kind of carve out, generally for jobs that involve control over large sums of money. U.S. Sen. Elizabeth Warren, D-Massachusetts, has introduced a similar bill nationally.
Barrett said in Massachusetts, the main reasons people have debt are student loans and medical bills. Other common reasons are loss of a job and divorce. "You're not talking about people who are long-term bad actors," Barrett said. "You're really talking about human beings who are hit with one bit of bad luck that lingers and lingers forever."
In Massachusetts, the average graduate of a four-year college has $29,300 in debt, according to the Institute for College Access and Success. Nearly one in five insured adults in Massachusetts reported problems paying medical bills over the past year, according to a 2015 survey by Blue Cross Blue Shield.
National surveys show that around 47 percent of employment interviews involve credit checks. One study by the Federal Trade Commission found that 25 percent of consumers identified errors in their own credit reports. Barrett said there is often no relationship between someone's credit history and their ability to do a job.
Barrett said he is open to discussing exemptions. "The question of how much of a loophole to create for particularly sensitive jobs is one we can continue to talk about," Barrett said. "The principle is that people should be able to get back on their feet, people should not encounter one bit of very bad luck and find themselves unable to recover. That wouldn't be the American dream. That would be a nightmare."
State Sen. Jamie Eldridge, D-Acton, a bill co-sponsor, said the bill is about employee rights. Eldridge said today, if a person lost a loved one or had a health care emergency and fell behind on their bills, that could impact their ability to pass a credit check and get a job - even though their credit problems may not affect their ability to do that job. "I don't think there's a connection, and I think it could potentially discriminate against those who are less well off," Eldridge said.
Margot Saunders, counsel at the National Consumer Law Center in Washington, which opposes the use of credit checks for employment, said there are a tremendous number of mistakes in credit reports, and it is difficult for consumers to get mistakes corrected. For example, someone with a common name may end up with someone else's credit information on their report. Particularly for jobs like grocery or drug store clerks, Saunders said, "A credit report has little to do with how trustworthy or how good an employee is."
But business groups say there are reasons for employers to do credit checks. Skarin said credit checks are common in the banking and financial services industries, where most jobs involve access to other people's money and personal information. "You want to make sure the people who are in those jobs are both qualified to do them but also aren't at risk for potentially doing something with that information or with those transactions," Skarin said.
Jon Hurst, president of the Retailers Association of Massachusetts, said few retailers use credit checks. But for those who do, it is a tool they can use to combat theft. "We really don't like the idea of taking tools away from any employer," Hurst said. "Is it a slam dunk indicator of a good employee or a bad employee? No. But it at least is an indicator of somebody that might be responsible, might be good with money, or vice versa."
Hurst said for Massachusetts to limit the use of credit checks puts local employers at a disadvantage compared to retailers in other states.
If the bill passes the Senate, it must still pass the House before the legislative session ends July 31 in order to become law.