Many people get into financial trouble at one point in their lives or another. Often, it’s through no fault of their own. Anything from medical bills to a job layoff can result in debt going to collection and your credit score taking a hit.
Even if someone has a low credit score because they aren’t good at managing money to tend to spend without considering the inevitable credit card bills, that may have little or nothing to do with whether they’re qualified for a particular job. However, some employers still do a credit check on applicants and even current employees who are being considered for a promotion.
A bill that’s currently under consideration in the Massachusetts legislature would end that practice for most private employers. The proposed law, “An Act reducing barriers to employment through credit discrimination,” would prohibit employers from seeking information from a credit reporting agency that provides information on an applicant or employee’s “credit worthiness, credit standing, or credit capacity” or using that information to make any employment decisions. Employers could not ask applicants or employees any questions about information on their credit report.
If the bill passes in the legislature and is signed into law by Gov. Maura Healy, which it’s expected to, it would take effect at the beginning of 2025. It would be the strongest prohibition on the use of credit reports by employers in the U.S.
When would employers be exempt from the law?
In some cases, of course, this information could be relevant to a person’s job. For example, if a person is dealing with large amounts of cash or they’re in a position where being in significant debt could make them a target for bribery or blackmail, a poor credit rating could – but may not – be problematic.
That’s why the legislation exempts financial institutions, employers that hire people who need to get a security clearance and any employer required by law to do credit checks on employees. Note that the legislation applies only to credit reports. It doesn’t affect any employer’s right to check people’s driving or criminal record.
If the bill becomes law, employers who knowingly violate it could have to pay damages and other expenses for employees who bring a claim against them. This is often the same with other employment laws that are in place to protect Massachusetts residents from discriminatory and other illegal practices. That’s why it’s crucial to know your rights and assert them effectively.
