Credit buying is much like being drunk. The buzz happens immediately, and it gives you a lift. The hangover comes the day after. -- Dr. Joyce BrothersMany of us have felt the effects -- both positive and negative -- of a buying binge. Sometimes, we spend wisely. At other times, our decisions are rational, but circumstances change, or we just get in a bit too deep. Regardless of the reasons or the outcomes, we make these decisions voluntarily, ourselves. No one puts a gun to our heads and says, "Buy this fridge on credit or else!"
Our credit histories can affect us in many ways, not least of which is in our efforts to find new employment. Over recent years, employers have grown more sophisticated in screening employment applications and using all of the tools available to them, include credit reports.
Apart from the ongoing attack on using criminal histories to screen applicants, about which I will write more in the near future, there is a new bill pending in the Michigan House of Representatives, sponsored by the usual suspects, that would prohibit employers from using credit histories to screen potential employees. Well, some employers would be prohibited. The bill's drafters have apparently discerned that, in some cases, it might be a bad idea to have an employee with credit problems.
Under the bill, HB 4363, banks, credit unions, accounting firms, casinos, and insurance companies are largely exempted and thus able to use credit histories to screen employees. All other employers are prohibited from doing so.
There are a couple of reasons supporters of this type of legislation will give. The first is that a person's credit history is irrelevant to her job performance. Is it really? If so, why the exemptions for certain employers? And since when does the government get to decide what is deemed relevant for a particular job? Granted, certain broad categories related to personal characteristics (mostly involuntary) are prohibited bases for employment decisions under our civil rights laws -- sex, age, race, creed, national origin, religion, height, weight, etc. But credit history? That's usually the result of a voluntary act -- assuming credit obligations and the risk that payment will become difficult. And if an employer determines, for example, that credit history is a good indicator of an employee's judgment and reliability, why shouldn't she be able to use it as a hiring tool?
A second reason offered by credit history opponents is that it has a disparate impact on minority applicants, presumable because they tend to have worse credit histories than white applicants. Again, if this is true, why the exemptions? Putting an exemption in the law does not wash away the discriminatory aspects of the hiring process, if there are any -- it enshrines them for those sectors who benefit from the exemptions.
The exempt industries regularly handle cash or information pertaining to other persons' credit. By exempting them, the law assumes that people with poor credit histories can't be trusted around money or others' personal financial information. So why isn't there an exemption for cashiers? or lawyers' offices? or doctors' offices? or pharmacies? or any other business that handles money or confidential information?
To be consistent, this law should have no exemptions whatsoever. As drafted, it is internally inconsistent and contradictory. As conceived, it is simply stupid.
This is what happens when political hacks micromanage the millions of basic, everyday decisions made by employers and business owners. They get it wrong. In fact, they are incapable of getting it right, so they just need to get out.