Should You Fire Someone for Having Too Much Debt?

A woman fired for carrying student loan debt has ignited the issue of employers accessing credit reports.
Business Writers
May 03, 2012

Latoya Horton’s college education has cost her her job.

She went to college to study accounting, and took out loans to pay for school. A few years later she got a temporary job in the accounting department of Bain & Company, and after six months of work “I was thrilled to be offered a full-time position,” she wrote in a petition on the site Change.org.

But just weeks after starting her new job, she was fired because her debt-to-credit ratio was too high, she said.

Demanding Change

Horton's petition implored credit-reporting giant TransUnion—one of the three major credit bureaus—to stop selling credit reports to employers. Within a week, the petition attracted some 40,000 signatures. Currently, nearly 130,000 people have signed it.

She wrote: “I later learned that 60% of employers now check credit reports, which typically include student debts. How are you supposed to pay off your student debts if you can’t get (or keep) a job BECAUSE of your debts? And what do my student debts have to do with my ability to do a job well anyway?” (To see a Society of Human Resources Management study about employers conducting credit background checks, click here.)

A Closer Look 

Her petition isn’t the only one. More than two dozen civil rights, fair employment and consumer groups have signed an appeal to Chicago-based TransUnion asking it to stop selling employment credit reports. The latter petition claims credit background checks for job candidates are discriminatory, poor predictors of performance and notoriously inaccurate.

In 2010, Rep. Dennis Kucinich (D-Ohio) and three fellow lawmakers launched an inquiry into the Defense Finance and Accounting Service, which fired dozens of employees because of their credit scores. DFAS processes paychecks for the country's military personnel.

"If you don't have good credit, you don't have a job, and to me that's unconscionable," Kucinich said. "What's next, debtors' prisons?" Kucinich also noted that 85 percent of the employees suspended or fired were African American.

After the congressional inquiry, DFAS announced it would temporarily halt the policy.

Going Deeper Into Debt

An April survey from Harris Interactive found that more than half of all U.S. adults who took out student loans to attend college still have an outstanding balance, a new survey shows. (Those loan balances carry on significantly into older age brackets—more than four in ten of those 35 and older still have an outstanding balance.) What's more, 70 percent of U.S. adults who took out loans to attend college are concerned about paying off the debt. And last year, for the first year, student loan debt outpaced credit card debt.

TransUnion's chairman, Penny Pritzker, serves on President Barack Obama’s Economic Recovery Advisory Board. Some say her company's lobbying efforts—the company has been aggressive in fighting any state legislative attempts to restrict the practice of selling employment credit reports—undermine the nation's goals of getting back to work more than 15 million unemployed people in the U.S.

Would you or do you currently check employees' credit reports? How have you found the practice useful?

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