Consumers surveyed shared that much of the debt going to collections agencies was for unexpected medical costs rather than for retail credit card usage. Households without health coverage were more than twice as likely to report that their credit score had declined in the past three years.
“It makes little sense to say that someone is not a good candidate for a job because they are still coping with the expense of a costly family medical emergency several years ago,” the report said. “Yet this may be exactly the type of situation that a blemished credit history indicates: having unpaid medical bills or medical debt is cited as one of the leading causes of bad credit among survey respondents.”
Amy Traub, the report’s author and a senior policy analyst at Demos, was even more frank. “This practice continues because it financially benefits the companies that market and sell this information to employers with little concern for the negative impact to the economic security of those with most at stake—low- and middle-income Americans struggling to find work in a tough job market.”
This specific finding on medical debt mirrors another by the Federal Reserve Board. According to the Fed, 52 percent of all accounts reported by collection agencies consisted of medical debt.
These consistent findings on medical debt are also reflected in America’s disproportionate unemployment data. The U.S. Bureau of Labor Statistics continues to show that Black unemployment doubles that of Whites. From December 2012 through February 2013, White unemployment averaged 7 percent. By contrast, Black unemployment stood at 14 percent.
So what is a debt-burdened, unemployed consumer to do?
The Fair Credit Reporting Act (FCRA) allows employers to request credit reports on job applicants and existing employees. The statute also lays out specific steps under which these credit checks must occur. By law, employers must:
First obtain written permission from the affected consumer before a credit review;
Notify individuals before any adverse action is taken as a result of the credit review;
Offer the employee or applicant a copy of the credit report, along with a written summary of his/her consumer’ rights; and
Provide job applicants with a brief period of time to dispute any errors in their report.
Additionally, eight states have laws against employment discrimination involving applicants’ credit history: California, Connecticut, Hawaii, Illinois, Maryland, Oregon, Washington, and Vermont.
Currently three other states are now considering similar legislation: Colorado, Massachusetts and New York.
If your state lacks laws against this type of discrimination, contact your local legislator about passing such legislation.
(Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org)