Testimony by Anna Platt, Paralegal in Consumer Protection Unit, to the New York City Council, Civil Rights Committee on Intro. 261, The Stop Credit Discrimination in Employment Act

September 12, 2014

Good morning and thank you for the opportunity to testify at today’s hearing.  My name is Anna Platt and I am a paralegal in the consumer protection project at the New York Legal Assistance Group (“NYLAG”). NYLAG provides free civil legal services to New Yorkers who cannot afford a private attorney. Founded in 1990, NYLAG is a nonprofit law office that works to empower individuals, protect fundamental legal rights, and promote access to justice.  NYLAG serves low-income consumers, immigrants, seniors, the homebound, families facing foreclosure, renters facing eviction, those in need of government assistance, children in need of special education, domestic violence victims, persons with disabilities, patients with chronic illness or disease, low-wage workers, low-income members of the LGBT community, Holocaust survivors, as well as others in need of free legal services.

I am offering my testimony today in strong support of the Stop Credit Discrimination in Employment Act because the discriminatory use of credit in making employment decisions harms New Yorkers, and prevents people who are willing to work hard from getting the jobs they need to get back on their feet and avoid further debt. Through our organization’s work, we are seeing a growing number of New Yorkers who are blocked from getting jobs, housing, and other desperately needed services because of bad credit. This bad credit is often the result of identity theft, predatory loans, illness, or job loss. It is not the result of financial mismanagement, irresponsibility, or fraud. Using credit as a proxy for employability is discriminatory and unfair, and does nothing to advance the interests of employers who rely on them.

The use of credit checks is particularly insidious because credit reports are frequently inaccurate. Nearly 80% of credit reports contain some error.  Additionally, use of credit histories in employment decisions disproportionately affects people of color and low income communities. Because these populations are targeted for predatory and high cost loans,  those individuals who fall prey to these schemes and take out these loans end up with damaged credit, which then acts as a bar to employment.

Many of the debts that result in poor credit are the result of identity theft, and our clients only learn that accounts were opened in their names when they apply for a job or housing, and are told that their bad credit bars them from an opportunity.  Even though these debts were the result of criminal activity, they still appear on credit reports, and employers can use this information against these individuals when they apply for jobs. Applicants are heavily stigmatized and labeled as untrustworthy, even though the debt that appears on the applicant’s credit report is not their debt. In our work, we are frequently approached by individuals who had their identities stolen and who are now being hounded””often through illegal practices–by collectors attempting to collect on a debt the individual never incurred in the first place.   For example, NYLAG is currently working with Manuel to clear his credit after a student loan was taken out in his name. Though Manuel never took out a student loan, and believes that his name was forged on the loan documents, the creditor managed to secure a default judgment by never properly serving him with notice of the lawsuit. This judgment appeared on Manuel’s credit report, and prevented him from getting jobs. When NYLAG first began working with Manuel, he told us that he had gone to job interviews and been offered a position that paid more than what Manuel originally requested, only to have the offer disappear once a credit check was performed. With NYLAG’s help, Manuel was able to vacate the default judgment and finally give him the opportunity to prove that he is not responsible for the loan that someone else took out in his name; however, in the meantime, Manuel lost many employment opportunities that would have enabled him to get back on his feet and begin a secure future.

Even if identity theft has not occurred, individuals often incur additional debt or fall behind on payments because of legitimate temporary hardships, such as illnesses or job loss. Though a debt reported on a credit report arose because of unfortunate life circumstance, employers can still use that fact to bar applicants from employment. Another of NYLAG’s clients, Jerry, fell behind on his credit card bills after he was laid off from the job he held for seven years. While Jerry struggles to find a job so he can pay his bills on time he is hindered by his poor credit report.  Failing to hire an otherwise qualified applicant for employment simply because her child was diagnosed with an expensive disability and she fell behind on credit card payments so she could pay her child’s medical expenses, or not hiring someone because his mother died and he was saddled with her debts and funeral costs, makes no sense and doesn’t help either the individual or the economy. This creates an even bigger problem, because without employment, individuals cannot move forward from their hardship to pay off debts and become financially stable. Using credit checks in employment only compounds the hardship people face, because it denies them the opportunity to become financially independent and earn a stable income to pay off their debts and rebuild their credit.

Even where debt is not the result of identity theft or a temporary period of financial hardship due to job loss or illness, credit reports do not reflect an applicant’s ability to do a job well. Indeed, a representative of TransUnion, one of the “Big 3”³ credit bureaus, which profit from the sale of credit information, admitted under oath that “we don’t have any research to show any statistical correlation between what’s in somebody’s credit report and their job performance or their likelihood to commit fraud.” Nevertheless, the credit reporting agencies continue to support the use of credit checks in employment decisions because it benefits them and hikes up their profits.

NYLAG calls on the NYC Council to do the right thing and pass Intro. 261, to ensure that all New Yorkers have fair access to employment and have even the chance to become financially stable.  Again, thank you for the opportunity to testify on this important bill.