[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]





                   LEGISLATIVE HEARING ON H.R. 3149,
                    THE EQUAL EMPLOYMENT FOR ALL ACT

=======================================================================

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 23, 2010

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 111-159











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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 BARNEY FRANK, Massachusetts, Chairman

PAUL E. KANJORSKI, Pennsylvania      SPENCER BACHUS, Alabama
MAXINE WATERS, California            MICHAEL N. CASTLE, Delaware
CAROLYN B. MALONEY, New York         PETER T. KING, New York
LUIS V. GUTIERREZ, Illinois          EDWARD R. ROYCE, California
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
MELVIN L. WATT, North Carolina       RON PAUL, Texas
GARY L. ACKERMAN, New York           DONALD A. MANZULLO, Illinois
BRAD SHERMAN, California             WALTER B. JONES, Jr., North 
GREGORY W. MEEKS, New York               Carolina
DENNIS MOORE, Kansas                 JUDY BIGGERT, Illinois
MICHAEL E. CAPUANO, Massachusetts    GARY G. MILLER, California
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
WM. LACY CLAY, Missouri                  Virginia
CAROLYN McCARTHY, New York           JEB HENSARLING, Texas
JOE BACA, California                 SCOTT GARRETT, New Jersey
STEPHEN F. LYNCH, Massachusetts      J. GRESHAM BARRETT, South Carolina
BRAD MILLER, North Carolina          JIM GERLACH, Pennsylvania
DAVID SCOTT, Georgia                 RANDY NEUGEBAUER, Texas
AL GREEN, Texas                      TOM PRICE, Georgia
EMANUEL CLEAVER, Missouri            PATRICK T. McHENRY, North Carolina
MELISSA L. BEAN, Illinois            JOHN CAMPBELL, California
GWEN MOORE, Wisconsin                ADAM PUTNAM, Florida
PAUL W. HODES, New Hampshire         MICHELE BACHMANN, Minnesota
KEITH ELLISON, Minnesota             THADDEUS G. McCOTTER, Michigan
RON KLEIN, Florida                   KEVIN McCARTHY, California
CHARLES A. WILSON, Ohio              BILL POSEY, Florida
ED PERLMUTTER, Colorado              LYNN JENKINS, Kansas
JOE DONNELLY, Indiana
BILL FOSTER, Illinois
ANDRE CARSON, Indiana
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho
JOHN ADLER, New Jersey
MARY JO KILROY, Ohio
STEVE DRIEHAUS, Ohio
SUZANNE KOSMAS, Florida
ALAN GRAYSON, Florida
JIM HIMES, Connecticut
GARY PETERS, Michigan
DAN MAFFEI, New York

        Jeanne M. Roslanowick, Staff Director and Chief Counsel
       Subcommittee on Financial Institutions and Consumer Credit

                 LUIS V. GUTIERREZ, Illinois, Chairman

CAROLYN B. MALONEY, New York         JEB HENSARLING, Texas
MELVIN L. WATT, North Carolina       J. GRESHAM BARRETT, South Carolina
GARY L. ACKERMAN, New York           MICHAEL N. CASTLE, Delaware
BRAD SHERMAN, California             PETER T. KING, New York
DENNIS MOORE, Kansas                 EDWARD R. ROYCE, California
PAUL E. KANJORSKI, Pennsylvania      WALTER B. JONES, Jr., North 
MAXINE WATERS, California                Carolina
RUBEN HINOJOSA, Texas                SHELLEY MOORE CAPITO, West 
CAROLYN McCARTHY, New York               Virginia
JOE BACA, California                 SCOTT GARRETT, New Jersey
AL GREEN, Texas                      JIM GERLACH, Pennsylvania
WM. LACY CLAY, Missouri              RANDY NEUGEBAUER, Texas
BRAD MILLER, North Carolina          TOM PRICE, Georgia
DAVID SCOTT, Georgia                 PATRICK T. McHENRY, North Carolina
EMANUEL CLEAVER, Missouri            JOHN CAMPBELL, California
MELISSA L. BEAN, Illinois            KEVIN McCARTHY, California
PAUL W. HODES, New Hampshire         KENNY MARCHANT, Texas
KEITH ELLISON, Minnesota             CHRISTOPHER LEE, New York
RON KLEIN, Florida                   ERIK PAULSEN, Minnesota
CHARLES A. WILSON, Ohio              LEONARD LANCE, New Jersey
GREGORY W. MEEKS, New York
BILL FOSTER, Illinois
ED PERLMUTTER, Colorado
JACKIE SPEIER, California
TRAVIS CHILDERS, Mississippi
WALT MINNICK, Idaho











                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 23, 2010...........................................     1
Appendix:
    September 23, 2010...........................................    41

                               WITNESSES
                      Thursday, September 23, 2010

Cohen, Hon. Steve, a Representative in Congress from the State of 
  Tennessee......................................................     4
Crawford, Sarah, Senior Counsel, Lawyers' Committee for Civil 
  Rights Under Law...............................................     9
Denston, Colleen Parker, Director of Human Resources, Worcester 
  Preparatory School, on behalf of the Society for Human Resource 
  Management (SHRM)..............................................    17
Gootkind, Judy, Vice President of Finance and Administration, 
  Creative Services, and Member, Board of Directors, National 
  Association of Professional Background Screeners (NAPBS).......    15
Klein, Adam, Partner, Outten & Golden LLP........................    14
Livingston, Donald R., Partner, Akin Gump Strauss Hauer & Feld 
  LLP, on behalf of the U.S. Chamber of Commerce.................    13
Shelton, Hilary O., Director, NAACP Washington Bureau............    19
Wu, Chi Chi, Staff Attorney, National Consumer Law Center (NCLC).    11

                                APPENDIX

Prepared statements:
    Gutierrez, Hon. Luis V.......................................    42
    Cohen, Hon. Steve............................................    47
    Crawford, Sarah..............................................    51
    Denston, Colleen Parker......................................    56
    Gootkind, Judy...............................................    63
    Klein, Adam..................................................    71
    Livingston, Donald R.........................................    78
    Shelton, Hilary O............................................    83
    Wu, Chi Chi..................................................    86

              Additional Material Submitted for the Record

Gutierrez, Hon. Luis:
    Demos report entitled, ``Discrediting Workers''..............    97
Neugebauer, Hon. Randy:
    Written statement of the Financial Services Roundtable.......   109
    Written statement of the National Federation of Independent 
      Business (NFIB)............................................   111
    Written statement of various trade associations..............   113

 
                   LEGISLATIVE HEARING ON H.R. 3149,
                    THE EQUAL EMPLOYMENT FOR ALL ACT

                              ----------                              


                      Thursday, September 23, 2010

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2220, Rayburn House Office Building, Hon. Luis V. 
Gutierrez [chairman of the subcommittee] presiding.
    Members present: Representatives Gutierrez, Watt, Moore of 
Kansas, Waters, Baca, Green, Scott, Cleaver; Neugebauer, 
Paulsen, and Lance.
    Chairman Gutierrez. This hearing of the Subcommittee on 
Financial Institutions and Consumer Credit will come to order. 
Good morning and thanks to all of the witnesses for agreeing to 
appear before the subcommittee today.
    Today's hearing will examine H.R. 3149, the Equal 
Employment for All Act, introduced by Representative Cohen. 
This legislation would prohibit the use of credit reports for 
employment purposes with several limited exceptions.
    As we will hear today, this is a growing and controversial 
use of these reports, and I look forward to the discussion. We 
will be limiting opening statements to 10 minutes per side, but 
without objection, all members' opening statements will be made 
a part of the record.
    We may have members who wish to attend but do not sit on 
the subcommittee. As they join us, I will offer an unanimous 
consent motion for each to sit with the committee and for them 
to ask questions as time allows.
    I yield myself 5 minutes for an opening statement.
    The Equal Employment for All Act was introduced by 
Representative Steve Cohen on July 9, 2009, and currently has 
55 cosponsors. I am proud to be an original cosponsor of the 
bill and have discussed its importance at hearings, briefings, 
and townhall meetings. This legislation, if enacted, would be a 
significant step forward in eliminating unfair hiring practices 
and open up more good jobs to those unemployed Americans who, 
aside from a poor credit report, are otherwise qualified to do 
these jobs.
    H.R. 3149 would amend the Fair Credit Reporting Act to 
prohibit an employer from using a consumer report for either 
employment purposes or for making an adverse action, including 
promotions, transfers and terminations, if the report contains 
information that bears upon the consumer's creditworthiness, 
credit standing, or credit capacity. This prohibition applies 
even if the consumer consents to the use or procurement of a 
consumer report for employment purposes or in connection with 
an adverse action concerning employment.
    The bill provides certain exemptions to this prohibition 
that we feel are proper, including jobs that require a national 
security or FDIC clearance, jobs with a State or local 
governmental agency that specifically require a credit check, 
or employment that is at a supervisory, managerial, 
professional, or executive level at a financial institution or 
is otherwise required by law. This legislation does not 
prohibit the use of background screening for a criminal 
background, even when it is not required by law.
    This subcommittee has held two hearings this year, on March 
24th and May 12th, in which we reviewed the methodology, impact 
of, and the use of consumer reports under the Fair Credit 
Reporting Act and discussed the potential impact of H.R. 3149, 
along with other reform proposals. We heard from various 
industry representatives, consumer advocates, and others.
    More recently, on August 30th, I held a townhall meeting in 
Chicago that was attended by hundreds who came from Detroit and 
Boston, even as far as Los Angeles and elsewhere, to express 
their concerns about the increasingly widespread use of credit 
checks for employment purposes. This practice unfairly hurts 
the chances of otherwise qualified candidates to get a job.
    Credit reports are simply inappropriate for use in most 
hiring decisions. An individual's credit history is often 
marred by circumstances beyond their control, such as income 
loss, medical problems, and the breakup of families, which 
often leads to bankruptcy. The Consumer Bankruptcy Project has 
estimated that 85 percent of bankruptcies are caused by these 
issues and a bankruptcy can have a strongly negative impact on 
your credit report. The industry's own studies indicate that 
bankruptcy, when noted in a credit report, is something that 
potential employers take into account when making employment 
decisions.
    Along with many others in Congress, I am concerned that 
relying upon credit reports will continue to have a harmful 
impact on many, especially on communities of color as 
minorities have disproportionately worse credit reports even 
when income is taken into consideration. No fewer than 8 
separate studies in the last 15 years conducted by the Federal 
Reserve, the Federal Trade Commission, the Brookings 
Institution, and Fair Isaac itself have documented the 
disproportionately lower report quality of minorities. The 
Equal Employment Opportunity Commission has repeatedly 
expressed their concern that the use of credit reports for 
employment purposes might violate Title VII of the Civil Rights 
Act.
    Even if there is no overt bias on the part of an employer 
against an applicant based on their credit report, there is the 
potential for a subconscious bias against those who have more 
negative data on their reports versus those who do not.
    You simply cannot tell a person's character, integrity, or 
how well they will perform their job by looking exclusively at 
their credit report. A credit report should not be one of the 
determining factors of whether someone gets a job. The fact 
that someone has a credit report that is not superior to 
another job candidate does not make them less able to do the 
work at an office or factory, nor does it make them more or 
less likely to steal from their employer.
    Four States, including my own of Illinois, have already 
passed legislation at the State level that will ban the 
widespread use of credit reports for employment purposes. 
Seventeen other States have legislation on this topic coming 
before them as well. Congress should act to make these sensible 
protections available to all Americans, not just those lucky 
enough to live in a State that is willing to protect them from 
this practice.
    We have heard testimony from the Consumer Data Industry 
Association, from Experian, TransUnion, and Equifax, from FICO 
and VantageScore and others about how credit reports are 
prepared and used. Among other witnesses, today we will hear 
from the National Association of Professional Background 
Screeners about how its members use, prepare, and provide 
background checks and consumer reports to employers. We will 
also hear from the Society for Human Resource Management about 
how its members use a current or prospective employee's 
consumer or credit report to make employment-related decisions.
    I welcome and thank these and other witnesses for appearing 
with us today.
    Now, I call upon the Minority for any opening statement.
    Mr. Neugebauer, would you--
    Mr. Neugebauer. Thank you, Mr. Chairman, and I will be 
brief.
    I just wanted to respond in that I think what is 
interesting is I think about 60 percent of the businesses in 
this country use credit reports as one of the tools that they 
use in making a final determination. So this is not like--
evidently, there has been some reason to correlate that as a 
part of the screening process, that credit reports are being 
helpful. Otherwise, we wouldn't have such a large number of 
employers using that tool.
    Obviously, we already have laws that prohibit 
discriminating against someone because of race, and everybody 
on this panel I think would agree that is unacceptable and that 
is the reason there are laws on the books to do that.
    But, also, this bill even precludes an applicant from 
allowing a business owner to run a credit report even if he or 
she requested it, basically taking away the individual's right. 
And, quite honestly, in some cases--I have been an employer. We 
have done credit reports on employees. Certainly it was just a 
tool, and I think the thing I would say to you is that I don't 
think it is the primary tool used, but I think that evidently 
the business community has found it to be a useful tool.
    And the fact that if I had two or three applicants who 
maybe were going to perform managerial functions in my company 
and they were all equal in many ways and I was looking for a 
tipping factor, if I found someone who was having a difficult 
time managing their own personal affairs, I would question 
whether they had the capability of managing my affairs as well.
    So I think there are several things troubling about this 
legislation, one, taking away an individual's right. We are 
moving left, but we are skipping to the left in this area. And, 
also, telling businesses that they can't use tools that they 
have evidently found to be effective in making hiring 
decisions, to me, is another taking, and certainly, I think our 
Founders didn't intend for us to move in that direction.
    Also, I ask unanimous consent to enter into the record 
statements submitted by NFIB, the Financial Services 
Roundtable, and 30 other business and trade associations, all 
whom are opposed to this legislation.
    Mr. Gutierrez. Without objection, it is so ordered.
    Mr. Neugebauer. I thank you, and I yield back my time.
    Chairman Gutierrez. Anybody else?
    We are ready to hear from the author of the bill. For our 
first panel, we will hear from the author of H.R. 3149, 
Representative Steve Cohen from the 9th District of Tennessee.
    Mr. Cohen, you have 5 minutes.

  STATEMENT OF THE HONORABLE STEVE COHEN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF TENNESSEE

    Mr. Cohen. Thank you, Mr. Chairman. I appreciate the 
opportunity to address the committee, and I also thank the 
ranking member for agreeing to this hearing and the members who 
are here on this panel.
    The Equal Employment for All Act is an important bill, and 
I hear the arguments made in opposition. But the fact is in 
this economy, which is in a recession--regardless of what any 
person might say or group, we are in a recession. It is 
difficult to find jobs right now, and when some employers use 
credit checks for a lot of people, particularly minorities, it 
makes it almost impossible to get a job.
    The use of credit checks to determine employment is a 
growing trend but a dangerous trend, and while some submit that 
it is an effective tool, that business must find it effective, 
I would submit to you, Mr. Chairman and members of the 
committee, there is no way business can know it is effective 
because if they don't give a person a job because of a bad 
credit score, how do they know that was a bad employee? They 
never hire anybody who has a bad credit score if they use that 
as the determining factor not to hire him. So they never know. 
They hire the other guy or the other woman.
    It is unfortunate that in our society, a high percentage of 
the people with bad credit scores are minorities, and I will 
get to that in a minute. In my district, 1 in 10 people are 
unemployed. My district has a very high African-American 
population. Among African Americans, it is more like one in 
five, and throughout the Nation, we see those same types of 
statistics. While in the Nation, it is 9.6 percent 
unemployment, among African Americans it is 16.3 percent, and 
among Latinos it is 10.4 percent.
    One of the reasons that credit checks contribute to the 
high unemployment among African Americans and Latinos is 
because they have not had a history of wealth in this country. 
That is what is known, gentlemen, as institutional racism. It 
is not racism on the front. I am not going to hire you because 
you are African American or you Latino or I am not going to 
hire you because you are a woman. It is the history of our 
Nation and what goes into it and the work product. And when you 
are African American and your family started out as slaves, 
from 1865 before, you didn't have a chance to build up wealth. 
Caucasians did. So you are starting behind.
    Jim Crow laws, you are still not getting jobs and 
opportunities, and you are getting to go to separate Plessy v. 
Ferguson schools that mean you are still in the hole. Whites 
are going to the good schools and getting the good books and 
getting the opportunity and Blacks aren't. So Whites build up a 
history of having money, family wealth passed on, the old 
family farm that we are trying to protect through inheritance 
laws, make sure we get whole family farms and not just 60 
percent of it.
    So those folks have money. They lose their job in this 
economy--and a lot of people have lost their jobs because they 
just cut back. FedEx cut off 10 percent. If you are Caucasian 
and your family built up some wealth from having friends whom 
you could sell real estate to and get a better 6 percent of a 
higher and more expensive house than somebody who is poor who 
doesn't have as many friends for those wealthy houses or a 
stockbroker contact that you know from the country club or 
whatever, you don't have accumulated wealth to help you through 
bad times. So you are more likely to have a bad credit score.
    The effect of that is African Americans, Latinos, and 
others who have immigrated to this country and haven't had 
wealth built up, that is what is called institutional racism. 
It is something that is not racism on the front. It is 
something that just happens through the institution of what 
goes in this Nation. So it is there, regardless of one does it 
on the front or doesn't even realize that it is something that 
is just part of the system.
    Forty-three percent of all employers admit to performing 
credit checks despite the fact that there is no study that says 
it is effective. Eric Rosenberg with TransUnion said in a 
hearing in Oregon during sworn testimony that his company had 
zero statistical evidence to document that employees with bad 
credit checks are more likely to steal or commit fraud than 
workers with perfect credit. A study at Eastern Kentucky said 
the same thing, as highlighted in The Hill in an article this 
morning about these studies.
    Nothing shows it is effective, and I would submit to you, 
some would say, oh, somebody's going to be more of a risk. 
There are exceptions for financial situations, but if somebody 
has a bad credit rating and they want a job, I would submit to 
you, once they get that job, they are less likely to commit any 
type of fraud than anybody else because they want that job. 
They are seeking a job, and they want to pay off their bills 
and earn a living. So they want to keep that job and not only 
not get arrested but keep that job. I think they are going to 
be extra good employees.
    There is simply no basis to show that it is an effective 
tool, and I think it is used in a de facto way to discriminate 
against people, whether it is intended to or not.
    This legislation has been endorsed by the NCAAP, the 
National Organization for Women, the National Consumer Law 
Center, the Leadership Conference on Civil Rights, the National 
Association of Consumer Advocates, Unite Here, the National 
Employment Law Project, the U.S. Employers Interest Research 
Group, the AFL-CIO, and the Lawyers Committee for Civil Rights.
    The law is simple. It says people should have a chance, 
some would say a second chance. I would say it is not even a 
second chance because they have done nothing wrong, but in show 
business, people get second chances all the time. In business, 
they do. If you think a credit check really determines whether 
you can be trustworthy, ask Sir Alan Stanford of Stanford 
Financial and all of his people, and what is the man's up name 
up in New York who ripped everybody off? Madoff, Bernie Madoff. 
They had great credit ratings. It is hard to tell somebody who 
is a crook and isn't credit ready, and I would submit a hard-
working person with a bad credit rating because of this society 
who wants a job is a better risk than somebody else, and I 
think they want to get that job and keep it to pay off their 
bills.
    I appreciate the committee's time, and I appreciate the red 
light because I have been on the other side of it, and I thank 
you for the opportunity to give this testimony.
    [The prepared statement of Representative Cohen can be 
found on page 47 of the appendix.]
    Chairman Gutierrez. Thank you so much for introducing the 
legislation, and I won't ask you any questions. I know we have 
some witnesses who are going to be enlightening us on your 
legislation.
    But I would like to just briefly say, they say that people 
have the moral responsibility these days to not walk away from 
their mortgages, walk away from their bills. I think we have 
the same responsibility to make sure they have a fair chance at 
taking care of that. I think people do, and given the kind of 
crisis that we have, a crisis that was not manufactured by 
them, that they have fallen into, I think credit reports, 
number one, have a lot of information that is erroneous to 
begin with, and number two, don't really tell the true nature, 
as you stated earlier.
    So I thank you for your legislation.
    Mr. Neugebauer, you are recognized for 5 minutes, if you 
have any questions.
    Mr. Neugebauer. Thank you.
    I respectfully disagree with the author of this bill. If it 
is found to be ineffective by all these studies, it is 
interesting to me that we have a substantial number of 
businesses--and I understand it is increasing--that are using 
credit reports as a part of and not the sole tool that they are 
doing it.
    So the other piece of it is is that from the gentleman's 
testimony it almost appears that he believes that employers, 
small businesses, large businesses across the country are using 
credit reports to kind of circumvent the Equal Employment 
Opportunity Act and, in fact, are overtly discriminating. I 
have not ever seen any reports or evidence of that, and I would 
ask the author if he has evidence that there is widespread use 
of this to circumvent equal opportunity laws. Because it is a 
fairly major accusation that you are making that these 
companies are, in fact, using this as a tool to be 
discriminatory.
    And I would tell you, as a former small businessperson, I 
am a little offended by that, the fact that you would think 
that, because I was using that, I was using that to 
discriminate, and I don't think that is the case. I haven't 
seen evidence, and I am certainly open to review such evidence 
if you can show me where studies have shown or that the law 
enforcement or people enforcing this are finding widespread use 
of credit reports to violate the Equal Opportunity Employment 
Act.
    Mr. Cohen. My passion sometimes might give the wrong 
impression. I didn't intend to imply that people were 
intentionally doing it. Institutional racism and those things 
are things that are just part of the system that we have had 
over the years, and when you have had over the years these 
factors, where Blacks are less likely to have accumulated 
wealth because they didn't inherit granddaddy's plantation or 
granddaddy's insurance company, they happen to be working on 
the plantation or working maybe at a low level, they don't have 
it. It is unwitting, unknowing discrimination.
    It is part of a system, and when you have a system where 
credit checks are necessarily unequal because you don't have 
accumulated wealth to build up on or histories of going to a 
certain college to get you into a college or the finances of 
your family to get you into that college--and contacts in 
college are important. I went to Vanderbilt. You go to 
Vanderbilt, you have better contacts to sell stocks to and you 
can sell Berkshire Hathaway and more shares of it than if you 
went to Texas Southern, and you don't have student body friends 
generally who have enough money to buy Berkshire Hathaway.
    It is not anything intentional. It is the fact that you get 
wealth. It is easier to have wealth if you come from a 
privileged background, and all of us who are Caucasian or have 
had histories here of working in families have privilege, and 
so it is nothing intentional. I am not suggesting people are 
intentionally discriminating. I am saying that they are doing 
it because of systems in society that we have not ferreted out, 
and it will take years to do that.
    Mr. Neugebauer. I guess there I go again disagreeing with 
you. I know a lot of people who didn't inherit a plantation or 
didn't inherit anything, who actually started from scratch.
    Mr. Cohen. There is no question about that, sir. That is 
why you don't find any Black people who did inherit a 
plantation.
    Mr. Neugebauer. I have African-American friends, I have 
Hispanic friends, who went out and basically they didn't 
inherit anything and they started from scratch and they started 
small businesses and they worked hard. This country was founded 
on the principle that if you work hard and apply yourself, you 
have the opportunity to succeed and to fail. Many times people 
fail; sometimes people succeed.
    But, again, I think the concept that the reason we are 
doing this is because not everybody inherited something again 
is a flawed reason to be taking away the rights and privileges 
not only of the people who are potentially looking for 
employment but also for the people who are actually employing 
and creating jobs in this country and penalizing them somehow 
because of an unsubstantiated reasoning that you are giving 
this committee today that people are using this process to 
somehow circumvent laws that are already in place. It is 
already against the law, and if someone believes that they were 
turned down for employment because of their race, they have an 
avenue to do that. It doesn't matter if it was because of the 
way they filled out the application or a reference check or 
their credit report. It is against the law to do that, and we 
don't need any more laws.
    Chairman Gutierrez. The gentleman's time has expired.
    Would anyone else would like to ask questions?
    Hearing no questions of the witness, I just want to enter 
into the record a report entitled, ``Discrediting Workers'' by 
Demos, and specifically pages 3 and 4 where Bank of America was 
found to have discriminated against African Americans by the 
very use, by a Federal judge, of using credit reports and 
disproportionately not hiring African Americans for entry level 
positions precisely because of using credit reports.
    Mr. Neugebauer. And Mr. Chairman, were they prosecuted for 
that?
    Chairman Gutierrez. There is a civil case.
    Mr. Neugebauer. And so what was the--
    Chairman Gutierrez. I don't think an individual is going to 
be sent to jail for this.
    Mr. Neugebauer. What was the outcome of it?
    Chairman Gutierrez. The outcome is that they have to go 
back and redo the whole thing over again. Because what the 
Federal court found and the judge found was that there was 
absolutely no good reason for using the credit report to 
determine whether or not the person was going to be a good 
employee, number one, and that even using the same credit 
scores--imagine, the same credit scores--this group got 700, 
this group using the same credit scores you still find 
disproportionate number of people not getting a job based on, 
unfortunately, the color of their skin. But we will give you a 
copy of the report.
    And the witnesses on the second panel, they will be coming 
up. So let's go to the witnesses who will speak to Mr. 
Neugebauer's questions.
    Ms. Waters. Before my colleague leaves, I would like to 
thank him for giving us this report and having this 
legislation. It is not easy to talk about discrimination or 
racism. You get accused of playing the race card every time, 
and so it has prohibited many folks from moving forward on some 
of these issues. But I want you to know that I appreciate the 
fact that you have the courage to do so.
    I am a cosponsor of this bill, and I think that we should 
all work toward making sure that these kinds of actions do not 
limit the ability of individuals to get a job. I do not believe 
credit scores have anything to do with whether or not you will 
be a good employee.
    Thank you very much.
    Mr. Cohen. You are welcome. Thank you.
    Chairman Gutierrez. Thank you.
    We will go to Mr. Scott.
    Mr. Scott. For the record, I, too, want to commend the 
Congressman from northwest Tennessee for taking this on. These 
are tough times. People are having difficulties, and the one 
thing that the credit reports determine, it deals with credit, 
good times, bad times. But the one thing that a credit report's 
history does not do, it does not determine or predict job 
performance or have anything to do with that. So it is sort of 
like measuring somebody but measuring them with the wrong set 
of measurements. You are attempting to correct that; and I, 
too, am proud to be a cosponsor of your bill and want to really 
just let you know how much we appreciate you taking the lead on 
this.
    Thank you.
    Chairman Gutierrez. Thank you, Congressman.
    We are going to call our first panel.
    Mr. Cohen. Thank you, gentlemen.
    Chairman Gutierrez. The first--I am sorry, the second 
panel. This is what happens when you have a panel of one.
    We are going to introduce Sarah Crawford, senior counsel 
for the Lawyers' Committee for Civil Rights Under Law. Next, we 
have Chi Chi Wu, staff attorney from the National Consumer Law 
Center. Following her will be Donald Livingston, partner of 
Akin Gump Strauss Hauer & Feld, LLP, representing the U.S. 
Chamber of Commerce. Next is Adam Klein, a partner of Outten 
and Golden, LLP. Next is Judy Gootkind, VP of finance and 
administration for Creative Services and a member of the board 
of directors of the National Association of Professional 
Background Screeners. Next, we have Colleen Parker Denston, 
director of H.R. at Worcester Preparatory School on behalf of 
the Society for Human Resource Management. And last but not 
least, Hilary Shelton, senior VP for advocacy at the NAACP.
    You are welcome, and we will begin with Sarah Crawford. 
Please, you are recognized for 5 minutes.

STATEMENT OF SARAH CRAWFORD, SENIOR COUNSEL, LAWYERS' COMMITTEE 
                   FOR CIVIL RIGHTS UNDER LAW

    Ms. Crawford. My name is Sarah Crawford, and I am senior 
counsel with the Employment Discrimination Project for the 
Lawyers' Committee for Civil Rights Under Law. I am honored to 
testify here today in support of the Equal Employment for All 
Act.
    In light of research showing the lack of predicted value of 
credit information, credit checks create an unnecessary 
obstacle for those seeking gainful employment. Credit checks 
create barriers for those who apply for a job in order to pay 
their bills, to support themselves and their families, and to 
get out of debt. I am here today to comment on the negative 
impact, particularly for communities of color.
    Credit checks are becoming an increasingly prevalent 
practice in the employment sector, as we have heard. According 
to a recent survey conducted by the Society for Human Resource 
Management, approximately 60 percent of its member employers 
use credit checks as a hiring tool, compared to 35 percent of 
its members in 2001. Some employers report that they use credit 
checks in hiring for all jobs. This practice is particularly 
troubling in light of research indicating that an individual's 
credit history does not predict job performance or risk of 
theft or fraud in the workplace.
    Contrary to the sales pitch promulgated by credit bureaus 
that profit from selling credit reports to employers, credit 
reports do not provide meaningful insight into character, 
responsibility, or propensity for theft in the workplace. And, 
as we have heard, a TransUnion official recently testified that 
there is no research to justify the practice.
    Research has shown that credit information does not predict 
job performance, as demonstrated by a recent study that looked 
into the credit reports of nearly 200 current and former 
employees working in the financial services areas of six 
companies. The study revealed that those with good credit 
reports were no more likely to receive positive performance 
evaluations and were no less likely to be terminated from their 
jobs. In fact, one aspect of the study revealed that workers 
with a higher number of late payments actually received higher 
performance ratings. So think about that. It makes common sense 
that someone who has bills to pay may have an added incentive 
to do their job well and perform well.
    While credit reports show whether bills have been paid on 
time, they do not reflect the circumstances surrounding debts 
or reasons for any late payments. For example, a credit report 
will not explain that an individual's credit suffered because 
she was the victim of identity theft, that her credit suffered 
as a result of divorce or death of a spouse, that she lost her 
job unexpectedly because her employer went out of business, or 
that she lost her health insurance coverage and incurred 
substantial medical bills.
    Indeed, credit reports fail to provide context and fail to 
provide information that can be easily interpreted for 
employment purposes, and I encourage you to review the credit 
report that was provided as an attachment to my testimony that 
was submitted here today and try to determine for yourself if 
that person is a good employee or a bad employee. It is very 
difficult to use the information in the credit report and make 
any kind of judgment about whether that person will be a 
performer.
    The medical debts reflected in credit reports raise 
particular concern. Medical debt often arises due to 
circumstances outside of an individual's control and can have a 
catastrophic impact on personal finances. Seventeen percent of 
our citizens are uninsured, including 12 percent of Whites, 21 
percent of Blacks, and 32 percent of Hispanics. And what 
happens when the uninsured face a major medical illness? Often, 
they incur medical debt; and further, a significant portion of 
those with health insurance face medical debt due to medical 
procedures that are not covered. Although most employers report 
that they do not base hiring decisions on medical debt, the 
impact of medical bills could be reflected in outstanding 
judgments, bankruptcies, foreclosures, and other forms of debt 
that employers may take into consideration. Indeed, over half 
of accounts in collection arise from medical debt.
    Credit background checks negatively and disproportionately 
impact communities of color and the poor. Unemployment has 
skyrocketed in recent years, and the effects of the recession 
have fallen most harshly on minorities. Currently, 16 percent 
of Blacks and 12 percent of Hispanics are unemployed, compared 
to 9 percent of Whites. Twenty-five percent of Blacks and 
Hispanics live in poverty, according to a recent report.
    Credit checks only compound this crisis. Because minorities 
are significantly more likely to have poor credit, credit 
checks screen out disproportionate numbers of minorities from 
job opportunities.
    In addition, I think, as most of you know, credit reports 
are rife with errors. One study found that most consumer credit 
reports surveyed contained some kind of error or mistake.
    I will just conclude by saying that this practice is based 
on flawed assumptions that have detrimental effects on those 
who simply want to work so that they can pay their bills and 
escape the vicious cycle of debt and unemployment.
    [The prepared statement of Ms. Crawford can be found on 
page 51 of the appendix.]
    Chairman Gutierrez. Thank you so much.
    Next, we will have Ms. Chi Chi Wu, who is staff attorney 
for the National Consumer Law Center. You are recognized for 5 
minutes.

STATEMENT OF CHI CHI WU, STAFF ATTORNEY, NATIONAL CONSUMER LAW 
                         CENTER (NCLC)

    Ms. Wu. Thank you, Mr. Chairman. Thank you, Representative 
Neugebauer, and members of the subcommittee, for inviting me 
here today.
    My name is Chi Chi Wu. I am testifying on behalf of low-
income clients at the National Consumer Law Center. Mr. 
Chairman, thank you for holding this hearing regarding H.R. 
3149, the Equal Employment for All Act.
    The use of credit reports in employment is a practice that 
is both harmful and unfair to American workers. For this 
reason, we strongly support H.R. 3149 and thank the chairman 
and Congressman Steve Cohen for introducing it.
    This bill would restrict the use of credit reports in 
employment to only those positions for which it is truly 
warranted, which is those requiring a national security or 
FDIC-mandated clearance.
    We oppose the unfettered use of credit histories and 
support this bill for a number of reasons.
    First is the absurdity of the practice. Considering credit 
histories in hiring creates a vicious catch-22 for job 
applicants. A worker who loses her job is likely to fall behind 
on her bills due to lack of income. She can't rebuild her 
credit history because she doesn't have a job, and if she can't 
get a job, she has bad credit. Commentators have called this a 
financial death spiral.
    Now, opponents of H.R. 3149 have argued there is no catch-
22 because employers use credit checks strategically and take 
into account the circumstances for a worker's financial 
difficulties, but we can't assume all employers are going to be 
this wise and fair. Yes, some employers may review credit 
histories carefully and thoroughly, but others may 
automatically screen out all applicants with a weak credit 
record. After all, it is easier and quicker to make a yes or no 
decision based on credit, especially in a competitive market 
where there are lots of applicants. Why take the trouble of 
being so careful? In fact, as Representative Neugebauer 
mentioned himself, that is a tipping point. If you have a bunch 
of candidates in front of you who are equally good, just get 
rid of the one with the bad credit record.
    That is what happened to Robert Mendez, an IT worker 
featured just this Tuesday on the PBS Nightly Business Report. 
He lost his job over a poor credit record, even though he 
explained it was the result of a layoff and was told it 
wouldn't be a problem, but it was.
    And, by the way, having provisions for consent in this bill 
wouldn't do any good for American workers who are hurt by this 
practice because the Fair Credit Reporting Act already requires 
the employee's consent to pull their credit record, and 
employees have to give it. If they want to be considered for 
the job, they have to consent. We already have that. It hasn't 
been effective in protecting workers.
    The use of credit history for job applicants is especially 
absurd when we have massive job losses and an unemployment rate 
of 9.6 percent and nearly 15 million workers looking for a job. 
It presents another barrier for economic recovery. It is the 
proverbial process of kicking someone when they are down.
    Combine job losses with foreclosures and other fallouts of 
the economic crisis and what we have seen is plummeting credit 
scores and damaged credit records. Fair Isaac reports that over 
one-quarter of consumers have a credit score under 600, 
considered a poor credit score, a 10 percent increase than 
before the recession. That means one-quarter of American 
workers are at risk of losing a job opportunity or even being 
terminated over their credit history.
    This is now exactly the wrong time to be permitting this 
unfair and inaccurate practice. Passing H.R. 3149 isn't just 
the right thing to do; it is an economic recovery measure.
    As we have heard, the use of credit histories also 
discriminates against African-American and Latino job 
applicants. We have had study after study documenting how they 
as a group have lower credit scores which are supposed to 
reflect their credit records. These groups have also been 
disproportionately affected by predatory credit practices, such 
as the marketing of subprime mortgages and overpriced auto 
loans and, as a result, have suffered higher foreclosure rates, 
all of which damaged their credit history.
    Despite all this harm to American workers, there is no 
evidence that credit history benefits employers by predicting 
job performance. We have heard that studies on this issue 
haven't found a correlation. Even industry representatives have 
said there is no correlation.
    Opponents to H.R. 3149 have cited a report noting that one 
of the warning signs exhibited by some fraudsters is financial 
difficulties or living beyond their means. Now, just because 
some fraudsters had financial difficulties doesn't mean that 
any worker with money problems is predisposed to theft. That is 
implying that 25 percent of American workers are likely 
thieves.
    The same study found that men are responsible for twice as 
much fraud as women. Workers over 50 incur losses that are 
twice as high, and another warning sign for fraud is divorce. 
No one is suggesting screening out men, older workers, or 
divorced workers because they are supposedly prone to 
committing theft.
    Also, some of the most frequent users of credit checks, 
such as health care or social service providers, aren't 
industries that handle large amounts of cash. Why are they 
screening the credit histories of day care workers, 
administrative assistants, and nurses?
    Finally, as we have testified many times here before, the 
credit reporting system has highlighted high rates of 
inaccuracies and a lot of flaws, rates that are unacceptable 
for purposes as important as use in employment. Some 3 percent 
to 12 percent to 37 percent--
    Chairman Gutierrez. Ten seconds to wrap up.
    Ms. Wu. In conclusion, the issue is whether workers are 
fairly judged on the ability to perform a job or discriminated 
against. I urge Congress to pass H.R. 3149.
    [The prepared statement of Ms. Wu can be found on page 86 
of the appendix.]
    Chairman Gutierrez. Next, we will hear from Mr. Donald 
Livingston for the U.S. Chamber of Commerce.

 STATEMENT OF DONALD R. LIVINGSTON, PARTNER, AKIN GUMP STRAUSS 
  HAUER & FELD LLP, ON BEHALF OF THE U.S. CHAMBER OF COMMERCE

    Mr. Livingston. Thank you for inviting me to testify today 
on behalf of the United States Chamber of Commerce.
    My name is Don Livingston. As you said, I am a partner with 
Akin Gump. I am also a former general counsel of the United 
States Equal Employment Opportunity Commission, where I 
directed the country's litigation in cases of employment 
discrimination.
    H.R. 3149 addresses concerns that the use of credit history 
information for employment decisions cannot be justified in 
many circumstances, and it addresses the concern that the 
adverse consequences of using credit history information falls 
more heavily on minorities. Plainly, these are important 
concerns, but these are concerns that we believe have been 
effectively dealt with by Congress under existing laws.
    Since at least 1973, employers have understood that they 
cannot use credit histories unless they can demonstrate that 
the practice is predicated and supported by considerations of 
business necessity. It was in 1973 that the EEOC issued a 
decision requiring that an employer's credit policy be job 
related if the burdens of the policy fall more heavily on 
minorities. The courts have agreed with the EEOC. Employers can 
use credit history information only when the employer can show 
it is job related for the job in question.
    H.R. 3149 differs from this approach. H.R. 3149 would not 
allow an employer to use job-related credit information except 
for specific categories of jobs. These are public-sector jobs, 
jobs requiring national security or FDIC clearances, and jobs 
at financial institutions.
    H.R. 3149 would eliminate the opportunity that employers 
have under existing law to demonstrate that the use of credit 
histories to assess the qualifications of applicants for other 
jobs is job related for those jobs. It cannot reasonably be 
argued that the existing job relatedness standard is not 
stringent or that it is not a powerful deterrent to an 
employer's broad use of credit history information.
    My written testimony provides several examples where courts 
have enjoined the use of credit information because the 
employer was unable to demonstrate that the information was job 
related for the specific jobs for which it was used, and I 
believe that the chairman has noted a more recent case where 
something similar occurred under employment discrimination 
laws.
    The job relatedness requirement under equal opportunity law 
has served well. The proposed legislation would serve less well 
because, except in narrow circumstances, it would prevent 
employers from using credit histories that they can justify by 
job relatedness and business necessity.
    I hope that my testimony proves helpful to the committee.
    [The prepared statement of Mr. Livingston can be found on 
page 78 of the appendix. ]
    Chairman Gutierrez. Thank you so much.
    Next, we will hear from Adam Klein.
    Mr. Klein, you are recognized for 5 minutes.

     STATEMENT OF ADAM KLEIN, PARTNER, OUTTEN & GOLDEN LLP

    Mr. Klein. Thank you. Good morning, and I appreciate the 
opportunity to come before the committee this morning.
    I am a plaintiffs' side civil rights lawyer working in the 
field of employment discrimination law. I think it is very 
fortunate that I can respond to the points that Mr. Livingston 
has made here.
    My practical experience and that of my firm and generally 
on the plaintiffs' side employment bar is that the problem or 
use of credit as a screen for employment is largely 
undetectable. The reality is that applicants who seek 
employment are not told that they are denied employment based 
on their poor credit history. What they may find out is they 
didn't get the job, but what they will not find out is why, and 
it makes logical sense. Why would a prospective employer tell 
an applicant the reasons that they did not get hired? It is 
obvious that, for the most part, in the overwhelming majority 
of cases or instances where applicants are denied employment, 
they are not going to have any idea that the use of credit was 
a factor in the decision.
    And you ask, isn't there at the Equal Employment 
Opportunity Commission the laws that Mr. Livingston mentioned, 
the Civil Rights Act of 1964 which, in fact, has banned use of 
credit if it has adverse impact and cannot be justified? Yes, 
but the EEOC is a charge-driven agency, meaning the applicants 
who are denied employment, who had their rights violated, need 
to know that in order to file a charge of discrimination. It is 
not enough to tell the EEOC that an African American or Latino, 
I wasn't hired and that I think that is suspicious. That isn't 
sufficient information for the EEOC, a charge-driven agency, to 
take action.
    Moreover, there are many other reasons that can come about 
why an applicant isn't hired, including the fact of the matter 
is that, by and large, it is a common-day event that people 
apply and don't get hired. That is not suspicious to a lot of 
people who go through that process. I am sure we have all not 
been hired over the course of our lives. So this is not an 
event that raises suspicion.
    What happens in my experience--in my firm's experience, I 
think generally, is that the isolated examples where there has 
been enforcement is in the rare circumstance where an employer 
inexplicably tells the applicant they were denied the job 
because of poor credit. We have had a couple of examples like 
that, where the employer sends a letter to the applicant saying 
you are conditionally hired subject to a background check and 
subsequently told, after they were conditionally offered the 
job, that I am sorry, we can't actually hire you because you 
failed our background check. That is the rare, rare instance. 
It is an exceptional circumstance where an applicant would be 
told that information.
    And so while there is enforcement provided by the Civil 
Rights Act, it is extremely difficult to detect this practice 
and for the EEOC to take effective action. I think that has 
historically been the case. It is why we see so few of these 
cases out there.
    It also is obvious when you look at the statistics that 60 
percent of employers are using this practice. If no one 
seriously argues that there is adverse impact, that racial 
minorities will be harmed by this practice, and yet there is no 
or very little enforcement action, there is a reason for that. 
So the problem is detection. The problem is employers are smart 
enough not to tell applicants why they were denied employment, 
and without that critical piece of information there is no 
enforcement available to the EEOC because EEOC is not going to 
be put on notice to a charge that this is a practice that is 
happening in the workforce.
    Another problem is that even if you have an applicant who 
receives disclosures that credit was used for a decision, under 
the Fair Credit Reporting Act oftentimes the information that 
is provided is unhelpful. It just provides information that you 
can challenge the credit report. It doesn't say what the 
information was used for. It doesn't provide any context. 
Oftentimes, we don't receive that, it has been our experience.
    Moreover, if you look at the information provided in the 
credit reports, they are highly inaccurate. I would suggest, 
and I say this, pull your own credit history. Take a look at 
it. See if it is accurate. See if you can determine, if there 
is a negative entry, what that means, where that came from. 
Oftentimes, it is a collection agency or something that is 
indecipherable. That is the information employers are using to 
decide whether someone should be employed or not.
    It doesn't make any sense. If it came to light, if 
employers are forced to disclose they used this information, it 
would clearly violate Federal civil rights statutes, and they 
would be targeting enforcement based on that.
    So I would urge this committee to pass H.R. 3149. I think 
it is long overdue and would have a major impact on the U.S. 
economy.
    Thank you.
    [The prepared statement of Mr. Klein can be found on page 
71 of the appendix.]
    Chairman Gutierrez. Thank you so much.
    Next, we will have Ms. Judy Gootkind, please, for 5 
minutes.

   STATEMENT OF JUDY GOOTKIND, VICE PRESIDENT OF FINANCE AND 
    ADMINISTRATION, CREATIVE SERVICES, AND MEMBER, BOARD OF 
  DIRECTORS, NATIONAL ASSOCIATION OF PROFESSIONAL BACKGROUND 
                       SCREENERS (NAPBS)

    Ms. Gootkind. Chairman Gutierrez, Ranking Member 
Neugebauer, and members of the committee, thank you for this 
opportunity to testify.
    My name is Judy Gootkind, and I appear here today on behalf 
of the National Association of Professional Background 
Screeners, NAPBS. I am member of NAPBS' board of directors. My 
company, Creative Services, Inc., located in Mansfield, 
Massachusetts, is a founding member of NAPBS, and my role at my 
company is vice president of finance and administration.
    NAPBS is a trade association founded in 2003 which 
represents over 700 companies engaged in employment and tenant 
background screenings across the country. Our membership 
includes a range of companies from Fortune 100 to small worker 
businesses. In fact, the majority of our regular members are 
small businesses with 12 or less employees. Collectively, we 
conduct millions of employment and tenant screening checks each 
year.
    In the employment context, we provide background checks for 
private employers, volunteer organizations, nonprofits, 
government, public utilities, health care, higher education, 
and publicly held corporations. NAPBS seeks to promote ethical 
business practices, promote compliance with the Fair Credit 
Reporting Act and State law analogs, and foster awareness of 
issues related to consumer protection and privacy rights within 
the background screening industry.
    Our industry is highly regulated both by the Federal Trade 
Commission and the newly created Bureau of Consumer Financial 
Protection. Our ability to provide our employer end users with 
consumer reports is driven by consumers' consent for such 
reports to be generated when they apply for employment or seek 
a promotion.
    Before responding to the committee's questions, I would 
like to point out NAPBS' concerns with H.R. 3149, the Equal 
Employment for All Act. We believe the legislation too narrowly 
restricts the use of credit reports for employment purposes and 
all but prohibits them in the private employment space. Our 
specific concerns are as follows:
    The legislation would limit the use of credit reports in 
private employment to certain positions at financial 
institutions, a narrowly defined term under the Fair Credit 
Reporting Act.
    The legislation would prohibit the requesting of credit 
reports for the following types of positions: lawyers, mortgage 
lenders, property managers, cashiers, pharmaceutical 
representatives, pharmacists, asset management and financial 
planners, jewelers, health providers, NBA referees, executives 
in nonfinancial institution employers, accounting employees, 
finance employees, information technology employees, 
procurement employees, and academic financial aid employees.
    Some would say that credit reports are reputation 
collateral, and for many consumers their credit history may be 
a good thing. NAPBS feels that there are instances beyond those 
which H.R. 3149 would allow in which it would be important and/
or necessary to our employer end users to request a credit 
report, either as a risk mitigation or a verification tool.
    I will turn now to the questions posed by the committee, 
and in the interest of time, I have shortened your questions.
    How do we develop the reports that you provide to 
employers?
    Each company who provides consumer reports to a third party 
is defined under the Fair Credit Reporting Act as a consumer 
reporting agency, or a CRA. We provide consumer reports to 
third party end users for a variety of permissible purposes 
under the Act, including for employment purposes. The FCRA 
specifically lists those permissible purposes for the use of 
such reports in Section 604.
    One such permissible purpose is for employment, which is 
defined in the law as a report used for the purpose of 
evaluating a consumer for employment, promotion, reassignment, 
or retention as an employee. A consumer report could include 
information from a variety of sources, including a credit 
history report, employment verification, or education 
verification.
    It is important to mention that, in the context of 
employment checks, a credit score is never included. The three 
major credit bureaus do not sell credit scores for employment 
purposes, nor are CRAs able to report such scores if the 
purpose of the consumer report is for employment.
    Question: Has the use of credit reports for employment 
increased over the past decade?
    NAPBS does not keep such data. From personal experience, I 
can tell you that at my company the request for credit reports 
from our end users has decreased.
    Question: Do you add any information in the reports you 
receive from credit bureaus?
    No. As a reseller of credit reports, most CRAs merely pass 
through the credit reports they receive from the credit 
bureaus.
    What kind of information is included in credit reports?
    We have provided a sample of a report as a part of our 
written testimony.
    Do you have any proof that a credit record is an indicator 
of someone's ability to successfully perform the duties of a 
job?
    CRAs are the providers of the information to end users when 
they are requesting background information, be it education or 
employment references or verification, credit history or 
criminal history. We believe the committee is better served by 
facts, rather than our personal views.
    Thank you for the opportunity to testify.
    [The prepared statement of Ms. Gootkind can be found on 
page 63 of the appendix.]
    Chairman Gutierrez. You are welcome.
    Colleen Parker Denston, please, you are recognized for 5 
minutes.

    STATEMENT OF COLLEEN PARKER DENSTON, DIRECTOR OF HUMAN 
   RESOURCES, WORCESTER PREPARATORY SCHOOL, ON BEHALF OF THE 
          SOCIETY FOR HUMAN RESOURCE MANAGEMENT (SHRM)

    Ms. Denston. Chairman Gutierrez, Ranking Member Neugebauer, 
and distinguished members of the subcommittee, my name is 
Colleen Denston. I am the director of human resources at 
Worcester Preparatory School located in Berlin, Maryland. I am 
also a member of the Society for Human Resource Management, 
otherwise known as SHRM. I thank you for the opportunity to 
appear before the subcommittee today to discuss the use of 
credit background checks in employment, and the Equal 
Employment for All Act.
    SHRM appreciates the heightened relevance of today's issues 
in the current economic environment. To be clear, we believe 
that employment decisions should be made on the basis of an 
individual's qualifications such as education, training, 
professional experience, reliability, and integrity, and not on 
factors that have no bearing on one's ability to perform job-
related duties.
    However, SHRM does believe there is a compelling public 
interest enabling our Nation's employers to take a full 
assessment of potential hires. This is because the consequences 
of making a poor hiring choice can be great. Consequences 
include financial or property losses for the company or 
employees, legal liability in the form of negligent hiring, 
identity theft, and physical harm to employees, customers, and 
property.
    To mitigate the potential of these threats in the 
workplace, the H.R. Department may conduct a background check 
on the final candidates or candidate. Some State laws even 
require employers to conduct background checks for certain 
positions such as licensed health care professionals, day care 
providers, and teachers.
    The background check process is described in detail in my 
written testimony. Under the Fair Credit Reporting Act, an 
employer that uses a third party or consumer reporting agency 
in a background process must notify the potential employee in 
advance, and it must obtain the applicant's approval to have 
his or her background checked by the provider.
    Before taking any adverse action based on that background 
report, such as deciding not to hire the individual, the 
employer is first required to give the applicant a copy of the 
background report and also a copy of a summary of your rights 
under the Fair Credit Reporting Act, which is a document 
prescribed by the Federal Trade Commission.
    As noted in my written testimony, employees are already 
afforded Federal protections from the misuse of credit 
background reviews. Beyond the Fair Credit Reporting Act, 
employers are barred by the Civil Rights Act of 1964 from using 
background checks to screen out protected job applicants. We 
are, therefore, very concerned that the Equal Employment for 
All Act, as currently drafted, would nullify the right afforded 
to most private organizations under the Fair Credit Reporting 
Act to consider credit information and many other factors in 
making employment decisions.
    Additionally, the legislation effectively concedes that it 
is appropriate for some employers to conduct credit checks, as 
evidenced by the bill's exceptions for national security or 
Federal Deposit Insurance Corporation clearance positions, 
State and local government positions, and supervisor or 
managerial position or executive positions at financial 
institutions. However, this is hardly a complete list of 
positions for which the public may have an interest in the 
integrity of its applicants, specifically those with the 
responsibility for managing money, property, personal identity, 
or financial information and other critical resources.
    Earlier this year, SHRM released one of the most complete 
surveys of employer background screening practices. The report 
found that the employer use of credit checks has not increased 
in recent years. Sixty percent of respondents said they conduct 
credit checks at least on some candidates, compared to 61 
percent that conducted credit checks in a similar report done 
in 2004.
    Most organizations do not do credit checks at all: 4 out of 
10 organizations reveal that they do not conduct credit checks. 
Employers generally conduct credit checks only for certain 
positions. Those positions include ones with financial 
responsibility, senior executive positions, and ones with 
access to highly confidential employee information. Employers 
overwhelmingly use credit checks at the end of the hiring 
process, not to screen out applicants. At least 87 percent of 
organizations initiate credit checks only after a contingent 
offer is made--that was 57 percent--or after the job--which was 
30 percent.
    In summary, employer reviews of credit information are one 
small but important part of the overall hiring process. Current 
Federal laws already safeguard employees, and job applicants 
from discrimination and background investigation and preserving 
employer's right to review credit information ensures the 
integrity of their work forces and helps protect employees, 
consumers, and businesses of all size.
    Thank you for your invitation to participate in today's 
hearing, and I welcome any questions you may have.
    [The prepared statement of Ms. Denston can be found on page 
56 of the appendix.]
    Chairman Gutierrez. Thank you so much. Now, we have Mr. 
Hilary Shelton, Senior VP for NAACP. You are recognized for 5 
minutes, sir.

  STATEMENT OF HILARY O. SHELTON, DIRECTOR, NAACP WASHINGTON 
                             BUREAU

    Mr. Shelton. Good morning, Mr. Chairman. My name is Hilary 
Shelton, and I am the director of the NAACP's Washington 
Bureau. The Washington Bureau is the Federal legislative and 
national public policy arm of our Nation's oldest and largest 
grassroots-based civil rights organization.
    I would like to begin by thanking Chairman Gutierrez and 
Ranking Member Hensarling for calling this important hearing, 
and I would also like to give special thanks to Chairman 
Gutierrez for cosponsoring this very crucial legislation.
    Also, finally, I would like to thank our good friends, 
Congressmen Cleaver, Green, Watt, Waters, Scott and others for 
their leadership on these crucial issues on financial services 
concerns.
    And finally, I would like to extend a sincere appreciation 
of the NAACP to our good friend, Congressman Cohen, for 
introducing this crucial legislation.
    The NAACP strongly supports H.R. 3149, the Equal Employment 
for All Act and urges its swift enactment. We continue to 
oppose the use of credit reports by employers when considering 
potential employees, as credit reports have proven to be 
racially biased and in most cases are irrelevant to the 
positions for which the individuals are being considered.
    Mr. Chairman and members of the subcommittee, as you know, 
our Nation is going through one of the most difficult economic 
times in recent history. The most recent numbers indicate that 
almost 15 million Americans were unemployed in August of this 
year, which has resulted in a national unemployment rate of 
about 9.6 percent. At the same time, the unemployment rate 
among African Americans was 16.3 percent, and among Latinos was 
12 percent. As we all know or can imagine, these high 
employment rates have led millions of Americans to postpone 
paying back their credit card debt, to borrow, to charge their 
credit cards to the limit, or to make difficult financial 
decisions they would not ordinarily face if they indeed had a 
job. As a result, their credit ratings may be more reflective 
of their current unemployment situation than the type of 
employees they may very well turn out to be. And since African 
Americans and other racial and ethnic minorities are 
disproportionately unemployed, their credit reports are going 
to be disproportionately negatively affected.
    Furthermore, African Americans and other racial and ethnic 
minorities were targeted for decades by unscrupulous predatory 
lenders and are now facing or have gone through a foreclosure 
at unprecedented and highly racially disparate rates.
    And now we enter into the Catch-22. With more potential 
employers using credit reports than ever before to assess 
potential employees, those with checkered credit histories are 
going to be the first eliminated from the potential job pool, 
despite the fact that many of them are the very people who most 
need a job in order to bring stability to their financial lives 
and otherwise.
    Are employers using credit reports more now than ever 
before? Studies suggest that they are. More than 47 percent of 
employers admitted to using credit checks in 2009 at least 
sometimes, up from 25 percent in 1998. So the trend continues.
    In addition to disproportionate unemployment rates, the 
disparately high foreclosure rates due to years of systematic 
targeting, there are several other reasons that credit reports 
and similarly credit scores for that matter, which often are 
used for the same information, appear to be an unfair and 
racially biased means of screening potential employees.
    If I might digress for just a moment, I say appear to be 
because, as I testified before this committee in 2003, we do 
not know exactly what these reports have in them. In essence, a 
basic piece of information is shared, but most of it is 
considered proprietary. What was clear at that time and what 
continues to be evident and for more studies are conducted and 
released, is that racial and ethnic minorities consistently 
have disproportionately lower credit scores and worse credit 
reports and than their Caucasian counterparts. Because we are 
sure that credit reports and credit scores are often based on 
similar information, it is fair to conclude that the problems 
with one are indeed the problems with the other.
    In 2007, the Federal Reserve Board report to the Congress 
on a credit scoring and racial disparities analysis analyzed 
300,000 credit files. Not surprisingly, the study found 
significant racial disparities. In fact, the average credit 
score for African Americans was approximately half that of 
White non-Hispanics, with Hispanics faring slightly better.
    There have also been several other well documented studies 
by respected governmental, quasi-governmental private 
organizations, and academia, all of which come to the same 
conclusion. Racial and ethnic minorities have lower credit 
scores than their White counterparts.
    Taking the next logical step to go to credit scores, we go 
to credit reports. So if credit scores and credit reports are 
disproportionately unfair to racial and ethnic minority 
Americans, why are they being used by more potential employers 
than ever before? Frankly, I do not know the answer to that 
question, as it makes no sense.
    With a few obvious exceptions, there is no credible 
evidence that credit reports are an accurate indicator of a 
potential employee's ability to perform the assigned duties, 
propensity to commit a crime, or even their trustworthiness.
    It is the contention of the NAACP that a resume, job 
references, and a face-to-face interview are much more reliable 
in telling a potential employer more about a job applicant 
without distortion. This will allow an individual to be judged 
on his or her ability to get the job done, not on irrelevant 
facts or unsubstantiated numbers.
    Mr. Chairman, I thank you for the opportunity to 
participate in this important hearing. I appreciate the 
subcommittee holding this hearing, and I look forward to your 
questions on this matter. Thank you very much.
    [The prepared statement of Mr. Shelton can be found on page 
83 of the appendix.]
    Chairman Gutierrez. Thank you so much.
    I want to go to this report by Demos, ``Discrediting 
Workers,'' and I just want to read a couple of paragraphs I 
think might be enlightening from the report:
    ``Earlier this year, the U.S. Government won a case brought 
by the Office of Federal Contract Compliance Programs in which 
Bank of America was found to have discriminated against--
    Mr. Moore of Kansas. Mr. Chairman, could you tell us what 
page you are on, please?
    Chairman Gutierrez. I am on page 3.
    Mr. Moore of Kansas. Thank you.
    Chairman Gutierrez. I am on page 3, the last paragraph, 
``was found to have discriminated against by using credit 
checks to hire entry level; that is, tellers, clerical and 
administrative. The percentage of candidates excluded because 
of a credit check was significantly higher for African 
Americans, 11\1/2\ percent, than for Whites, 6.6 percent. 
Generally, civil rights law requires employers to justify 
appropriateness of an employment practice if it creates such a 
disparate impact on a group historically subject to job 
discrimination.''
    So there is a disparate impact, and we should figure out 
why.
    Despite the clear disparate impact of the policy on African 
Americans, Bank of America conducted no study to determine 
whether credit reports were actually a predictor of job 
performance and had not investigated the issue. That is, the 
company never went about the business of saying, let's see, 
let's do a study. Is this a good program that we should use, 
and does it really tell us anything?
    An expert cited in the court's decision found the bank's 
review of credit reports to be highly subjective with no 
specifications about what thresholds had to be met for what 
indicators. The judge concluded, ``There is no evidence of any 
criteria used by the recruiter in using credit report 
information to disqualify applicants.'' In the end, the bank 
was unable to offer evidence supporting its main justification 
for the practice, which was the credit reports were required 
for security and bonding purposes. Americans of color have 
comparatively weak credit profiles due in large part to public 
policies and lending practices.
    And then it goes on to make a statement.
    So, that has been shown. And I just want to say that I 
thank everybody for putting the issue of consent. But the fact 
is, the way lawyers have told me, if I go for a job and they 
say can we have, sign for your credit report and I say no, you 
can just tell me you are not hired. Thank you. But you are not 
getting a job here. So I actually have fewer rights. I should 
sign, get it, because I might have a right to sue later on that 
you discriminated against me based on that credit report.
    So the whole thing of consent I think is really false here. 
You can't get the job if you don't consent. As a matter of 
fact, they can discriminate against you by simply telling you 
you do not have this job; thank you very much. You didn't sign 
for the consent. So you are even in a worse position.
    And then there are just jobs that, we had testimony in 
Chicago from people who literally mop floors and clean 
bathrooms who because they have bad credit reports--I don't 
quite get it. It is a vicious cycle. We are here to help 
Americans. Everybody lifts themselves up by their boot straps. 
How do you lift yourself up by your boot straps if you are in 
economic turmoil in your credit report?
    Credit reports? They have so many errors in them, so many 
mistakes. I don't think anybody here would like to be judged by 
a third party who makes lots of mistakes. And I would just ask 
all my colleagues, since you get free credit reports, just get 
your credit report. You are going to find a lot of mistakes and 
a lot of bad information on those credit reports. I know I have 
done it, and I have to be very, very careful and continue to 
look at it and to look at it and to look at it to make sure 
that we are there.
    And lastly, look, there are historical measures here. Just 
drive. I can drive down Cicero Avenue and I can start, I don't 
know, around Roosevelt and go to North Avenue and drive down. 
Cicero Avenue is a major street. And you can drive for nearly 3 
miles through an African-American neighborhood down Cicero, and 
you know what, and I just looked at it the other day because I 
was just driving, and I didn't see a major bank, not one major 
bank. Even the gasoline stations were like Thrifty gasoline 
stations. I didn't see Walgreens or an Osco or a CVS open 
anywhere. How would I say it? I went and I said oh, there must 
be a big grocery store because Black people have to go eat, 
they have to go buy groceries, right? There were no Jewels, no 
Dominics, none of the major franchises. So the things that we 
see advertised on TV, it is almost, I think sometimes if you 
are African American you see things on TV and say I wonder 
where those stores are at because they are not open in my 
neighborhood. Wonder where that bank is, because it is not open 
in my neighborhood. So there are conditions.
    Now why is it that those neighborhoods are excluded from 
those opportunities? And those opportunities have disparate 
impact on those communities. And I just want to tell you, you 
can go Roosevelt south and you can go North Avenue north and 
you find all those wonderful institutions on that same Cicero 
Avenue. The only thing that changes is the color of the skin of 
the people who live adjacent to that avenue. That is why I 
think it is important to look at historical conditions.
    And yes, it isn't that people just cry discrimination, 
discrimination, discrimination the fact is that if you just 
open your eyes you see it.
    So I thank all of the witnesses.
    And Mr. Neugebauer, you are recognized for 5 minutes.
    Mr. Neugebauer. Thank you, Mr. Chairman. It has been a 
little difficult sometimes to understand exactly what the 
title. I had to go back and look at what the title of this 
hearing was. We have talked about a lot of different issues 
here.
    I want to go back to one of the things that the chairman 
was talking about, was the lawsuit that was filed against that 
bank. And I don't know whether it was appealed or not, but I 
think what it does show is that there are existing laws and 
that a case was brought against this bank. They evidently had 
hiring policies in that bank that the judge found troubling, 
and so the system worked. And we didn't even have this piece of 
legislation in place.
    I was glad to hear some of the other panel understand and 
recognize the value of having somewhat of an idea about the 
background of the individuals that are applying for these jobs. 
And I also agree with everybody on the panel that 
discrimination is unacceptable, and I think we have gone a long 
way in removing some of that discrimination in this country. 
Have we completely eliminated it? No, but you know there are a 
lot of different forms of discrimination in this country.
    But really, I think what maybe was the intention of this 
legislation, and I have heard some of my colleagues allude to 
it as well, is about the economy and about jobs and about 
families that are having a hard time across this country. And 
all of us are concerned about that when we have almost 15 
million people out of work in this country, almost 10 percent. 
And when you look at the U6 number, which is those people who 
took a lesser job and maybe gave up looking for a job, it is 
almost 17 percent. So we have a real problem in our country.
    But really what we ought to be spending a lot of our time 
on instead of whether employers ought to have the right to run 
credit reports or not, we ought to be down on the Floor of this 
House of Representatives extending tax breaks for small 
businesses all across this country. Those are the people who do 
create the jobs. Those are the people that we are talking about 
here today who will provide opportunities for minorities and 
people of all races and color to be able to have an opportunity 
to have jobs in this country and so if they do have jobs, that 
they don't have bad credit scores.
    And the reason some people have bad credit scores, by the 
way, wake up to the real world, is not because they don't have 
jobs or good jobs. I know a lot of people who have good paying 
jobs that have very bad credit scores. And so just being poor 
doesn't mean that you have bad credit and just being rich 
doesn't mean you have good credit.
    But we ought to stop all of these job-killing things that 
this Administration is doing. I was back in my district in 
August and time and time and time again they said, Congressman, 
I could hire some additional people. I could buy an additional 
piece of machinery that I could use in my business. But you 
know what? There is too much uncertainty. We don't know what 
this new health insurance plan is going to cost us. We don't 
know what EPA is going to do with greenhouse gases. We don't 
know what the tax environment is going to be. And every time we 
turn around, we look at Congress spending money that it doesn't 
have and borrowing money from foreign countries and it has 
created some uncertainty so we are not doing anything.
    And so really, if we really want to help people in this 
country have better credit scores, then what we ought to really 
be doing is helping people to have better jobs in this country. 
And the way we help people have better jobs in this country is 
we get this Congress off high center here and quit worrying 
about the politics of if we increase taxes for this group or we 
don't, what we ought to do is be leaving the money back in the 
economy of this country so that we can create jobs in this 
country.
    Government doesn't create jobs and we have seen that. We 
have thrown trillions of dollars at programs, and we are going 
to be down on the Floor again this afternoon, another attempt 
at letting the government try to create jobs and do incentive 
type activities that don't work. They don't work, the President 
said they were going to work. And what has happened since then 
is we have lost over 2\1/2\ million jobs in this country.
    And so I would hope that our efforts really would be to 
help these families and help get America back to work instead 
of trying to limit the rights of people to provide opportunity 
and documentation to get a job and to limit the ability for 
employers to make good hiring decisions so that we can move 
this country forward.
    With that, I yield back my time.
    Mr. Cleaver. [presiding] I recognize the gentlewoman from 
California, Ms. Waters.
    Ms. Waters. Thank you very much, Mr. Chairman. I would like 
to try and get a couple of questions in. My first question 
would be to Mr. Don Livingston. You were, you directed our 
country's litigation in cases of employment discrimination over 
at the EEOC. Did you direct any cases relative to 
discrimination based on credit checks at all? Did you ever have 
any of those cases?
    Mr. Livingston. I can't say. I just can't say. We had, we 
brought about 500 cases a year and I was there for 3 years.
    Ms. Waters. You don't remember any?
    Mr. Livingston. No, ma'am.
    Ms. Waters. Okay. Thank you. Let me also move quickly to 
Ms. Gootkind. You are the Chair of NAPDS. You have a board. Now 
let me just ask. You have a board of directors. They are making 
policy decisions for this organization for your company, is 
that right?
    Ms. Gootkind. We have a board of directors that directs the 
activity on behalf of the members of the company.
    Ms. Waters. So, and all of these people, you checked their 
credit backgrounds?
    Ms. Gootkind. The different consumer reporting agencies 
that are members of our foundation would have their particular 
practices. I can tell you that in my company, we do background 
checks, yes.
    Ms. Waters. Do you know if the credit, have they checked 
credit on all of these directors?
    Ms. Gootkind. I don't have the information on every 
particular member company of the association. I can speak to my 
company. We do national security background checks and so 
everyone who is a member of my company, an employee in my 
company does have to have a credit check done because it is 
required by the industry.
    Ms. Waters. But you don't know if the board of directors 
are credit checked?
    Ms. Gootkind. I don't have that information here today.
    Ms. Waters. Sometimes, it is instructive and very helpful 
if boards are representative of all of the people that they are 
making decisions about. Do you think that this board is 
representative?
    Ms. Gootkind. I would say yes.
    Ms. Waters. Why do you think it is representative?
    Ms. Gootkind. Again, we are members of the consumer 
reporting industry. What we do is we deal with best practices. 
We deal with legislative initiatives. We have a brand, it is a 
relatively new organization.
    Ms. Waters. Do you have diversity on your board?
    Ms. Gootkind. Pardon me?
    Ms. Waters. Do you have diversity on your board in racial 
make up and--
    Ms. Gootkind. Diversity in the member organizations.
    Ms. Waters. The board of directors. I am looking at and we 
have been checking a little bit. And my question is, the Chair-
elect is Theresa Preg.
    Ms. Gootkind. Correct.
    Ms. Waters. You have the treasurer, Mr. Fred Giles.
    Ms. Gootkind. Correct.
    Ms. Waters. Noelle Harling is the secretary. Dan Shoemaker 
is your past Chair, Bruce Berger, Judy Gootkind, that is you, 
Julie Hickman, Nancy Ann Roberts, Christine Cooney, Don 
Standwick, Carl McManns, and Dean Corris. Do you have any 
African Americans on this board?
    Ms. Gootkind. We do not.
    Ms. Waters. Do you have any Latinos on this board?
    Ms. Gootkind. We do not.
    Ms. Waters. Do you have any Asians on this board?
    Ms. Gootkind. We do not.
    Ms. Waters. How then is it representative of the people 
that you are making decisions about?
    Ms. Gootkind. Again, these are elected to the board, 
individuals who are representative of the consumer reporting 
agencies that make up our reporting organizations.
    Ms. Waters. So the consumer reporting agencies that make up 
your board have sent you representatives who are basically all 
White?
    Ms. Gootkind. That is correct.
    Ms. Waters. I can't hear you.
    Ms. Gootkind. That is correct.
    Ms. Waters. And we are here today talking about the 
problems that are created with the policies of credit checks 
for employment. But you have nobody on your board who 
represents any of those classes that we are so concerned about; 
is that correct?
    Ms. Gootkind. That is correct.
    Ms. Waters. Thank you very much.
    I yield back the balance of my time. How much time did I 
have left?
    Mr. Cleaver. You have about 25 seconds.
    Ms. Waters. Okay. Then I yield back. Thank you.
    Mr. Green. I will yield my time.
    Mr. Cleaver. Mr. Green is yielding whatever time.
    Ms. Waters. Thank you very much. I will just take a minute 
here. One of the big three credit bureaus, Experian I think it 
is pronounced, touts in its Web site that its employment 
screening product, Employment Insight, helps you make better 
employee hiring decisions by quickly and cost effectively 
providing objective and factual credit information. Credit 
information provides insight into an applicant's integrity and 
responsibility toward his or her financial obligations.
    Do you agree with this statement that credit information 
provides insight into an applicant's integrity? Mr. Livingston?
    Mr. Livingston. In some circumstances, sure. But I think we 
all tend to think about just certain paradigms. But if we were, 
for example, doing a background investigation on someone who is 
a candidate for a, say, chief financial officer, and we were to 
find that this person was routinely late in making payments, 
then that might be a factor.
    Ms. Waters. Yes, but the question that I am asking is about 
the statement of Experian. Do you buy that statement? Do you 
concur with that statement?
    Mr. Livingston. I don't know that company, and I would 
think in many circumstances the statement would not be--
    Ms. Waters. Ms. Gootkind, what about you?
    Ms. Gootkind. Can you read it again to me, please?
    Ms. Waters. One of the big three credit bureaus, Experian, 
touts in its Web site that its employment screening product, 
Employment Insight, helps you make better employee hiring 
decisions by quickly and cost effectively providing objective 
and factual credit information. Credit information provides 
insight into an applicant's integrity and responsibility toward 
his or her financial obligations.
    Do you--
    Ms. Gootkind. If I could comment, I think that credit 
reports are one component of the background investigation.
    Ms. Waters. So you don't believe in this statement the way 
they have put forth?
    Ms. Gootkind. I would say that the credit report is a risk 
mitigation tool, but it is also a verification tool that is 
used by consumer reporting agencies.
    Ms. Waters. Thank you. Ms. Denston?
    Ms. Denston. Yes, Congresswoman. I don't know that I agree 
with the statement as it is just for credit reports. But I do 
know that it is used as a tool.
    Ms. Waters. I am just asking about what they say. They said 
credit information provides insight into an applicant's 
integrity and responsibility toward his or her financial 
obligations. Do you believe that?
    Ms. Denston. Not so much integrity, but responsibility, 
yes.
    Ms. Waters. Okay. So you don't believe it. Thank you. And 
thank you very much for the time. I yield back.
    Mr. Cleaver. The Chair recognizes the gentleman from New 
Jersey, Mr. Lance.
    Mr. Lance. Thank you, Mr. Chairman. And good morning to you 
all. To Mr. Livingston, I am reviewing your testimony. As I 
understand the bill, and based upon your written testimony, 
exceptions would be provided for those holding jobs with State 
and local governmental agencies, national security, 
supervisory, managerial, professional or executive 
responsibility at financial institutions or when otherwise 
required by law.
    Number 4 impresses me as being broad in nature. Do you have 
any understanding, sir, what that might be criterion for?
    Is it your understanding that the current law prohibits 
employment discrimination based upon race, religion, creed, 
national origin, and other bogus criteria?
    Mr. Livingston. Yes, sir. The answer is yes. Federal law 
prohibits discrimination on the basis of race and those other 
factors.
    Mr. Lance. Are there other irrelevant criteria?
    As I read these various categories, if one were to seek a 
position as the chief financial officer of a hospital, for 
example, it does not impress me as coming within any of the 
exceptions that I am reading based upon your testimony. Would 
that be your understanding as well?
    Mr. Livingston. Yes, sir. That would, to look into the 
credit history of someone seeking that job would be unlawful 
under this legislation.
    Mr. Lance. I have, of course, several hospitals in the 
district I represent, as do all Members of Congress. And 
certainly, if I were on the board of a hospital, as my twin 
brother is, I think it would be perfectly legitimate to seek 
the credit history of someone applying for the position of the 
chief financial officer of a hospital. Can you give me other 
examples where it would become illegal to look at the credit 
history of a person, other examples, perhaps if not in the 
nonprofit sector, in the private sector?
    Mr. Livingston. Ms. Gootkind had an extensive list in her 
testimony. I was impressed by the number of categories that she 
used.
    Mr. Lance. Thank you. I therefore defer to Ms. Gootkind. 
What were some of those categories?
    Ms. Gootkind. We feel that there are industries that use 
background checks as well as individual positions that are 
being hired for that have responsibility to cash information, 
consumers information and things of that nature. I would be 
happy to read the list to you again if you want.
    Mr. Lance. If you would just briefly highlight several of 
the categories.
    Ms. Gootkind. Lawyers, mortgage lenders, property managers, 
cashiers.
    Mr. Lance. Thank you. So, for example, I am an attorney. If 
I were to apply for a position in a law firm, it would be 
illegal for that law firm to examine my credit history under 
the provisions contained in this potential legislation?
    Ms. Gootkind. That is correct.
    Mr. Lance. Other members of the panel, would you think it 
appropriate to use credit as one of the criteria for a chief 
financial officer of a hospital or for employment in a law 
firm? And I would open it up to the entire panel. Mr. Shelton, 
good morning.
    Mr. Shelton. Good morning. If you will repeat the question 
specifically.
    Mr. Lance. Of course, sir. If I were to apply for the 
position of the chief financial officer of a hospital.
    Mr. Shelton. Yes, can you establish the need? Why indeed 
would you need that kind of background information? Would it be 
nothing more than just another device to actually exclude many 
from consideration? Quite frankly, when I think about our 
conditions today and what affects our credit ratings and, quite 
frankly, what affects our financial disclosure, we are also 
thinking about those of us who took out multiple student loans 
to be able to finish our degrees and get our levels of higher 
education achieved. And very well indeed what you would be 
doing is locking out many who struggled to get from the bottom 
to be able to be considered for important positions like this. 
I don't see any basis for the need for that kind of 
information.
    Mr. Lance. So it is your position that you do not see a 
need for consideration for the position of chief financial 
officer of a hospital?
    Mr. Shelton. I would want to know, quite frankly, if they 
have the skills to be able to carry out those responsibilities. 
I would not like extraneous diversions from the real issues and 
concerns of that person's integrity, ability, and that person's 
background to be able to fulfill the responsibilities for these 
positions. And certainly, I don't see where this kind of 
information is helpful at all.
    Mr. Lance. Thank you. I appreciate your answer to the 
question. I respectfully disagree.
    Thank you, Mr. Chairman.
    Mr. Cleaver. The Chair recognizes the gentleman from North 
Carolina, Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman. We quite often sit in 
these hearings and markups and legislative sessions and marvel 
at the difference in the backgrounds that people bring to these 
deliberations. I don't think I have seen many that reflect that 
difference more than this morning's discussion between the 
folks on one side of the aisle and the folks on the other side 
of the aisle who come from different backgrounds, live in 
different worlds, and don't understand the realities of how 
things work in the real world that we live in, at least. Maybe 
they understand it in the world they live in.
    It doesn't take much for me to relate to the need for this 
kind of legislation, even based on my own personal experiences 
going back to high school when I got a summer job in a small 
warehouse, and there were four people working in that 
warehouse, all making very, very low wages, but the hardest-
working people I had ever seen in my life. And they were always 
in some kind of credit crunch that would ultimately show up on 
their credit report, but had nothing to do with their 
commitment to the job that they were doing every day for 
virtually minimum wages, showing up on their credit report 
because they were making virtually minimum wages, and it was 
virtually impossible for them to make ends meet.
    Fast forward to the time that I practiced law in the law 
firm that was litigating Griggs v. Duke Power, which 
established the job-relatedness requirement when employers were 
taking the same position that some of the witnesses on this 
panel are taking, that employers ought to be able to establish 
whatever criteria they want to establish, whether it had any 
justifiable relationship to the employment that they were 
hiring people or not, and the result was that systematically, 
Blacks were ending up in the lowest categories, and others were 
ending up in the higher categories.
    I dare say, Ms. Gootkind, the striking thing about Ms. 
Waters' line of questioning, although I thought it was very 
personal, I dare say there is not a person on that board who 
got on that board having to have had a credit check. That is 
just a difference in the worlds that we live in.
    So this is something that is hard for me to relate to this 
discussion without understanding that we come from different 
worlds here.
    And so a number of us have been strong advocates for doing 
away with this, these credit reports that have adverse impacts 
on people's ability to do, to get jobs, have adverse impacts on 
their ability to get insurance. I, for the life of me, can't 
understand why, how somebody's credit report impacts their 
driving ability and their car insurance rates, or the 
likelihood that they would have a fire at their home. So it 
adversely impacts the rates on their homeowners insurance 
policies. There is no relatedness there.
    It is just a vicious cycle that takes you back to the very 
thing that Mr. Cohen testified about in his opening statement: 
That is the way we have always done it, and therefore, we 
justify it because we have always done it that way.
    And I dare say, just fast forwarding a little bit further, 
now that I am in Congress and have Bank of America as one of my 
prime corporate constituents, and having heard them be 
discussed here in an adverse way, they are probably better off 
with this bill because they don't have to worry about whether 
they go out and look at some irrelevant criteria that doesn't 
have any application to whether they can hire a janitor or a 
mail clerk or whatever.
    So I am sorry. I didn't mean to get on a soap box here. I 
just wanted to--
    Mr. Cleaver. If someone wants to yield another--
    Mr. Watt. No. I don't want to take anybody else's time 
because I would just further pontificate on these different 
worlds that we come from. It is striking.
    I yield back, Mr. Chairman.
    Mr. Cleaver. The Chair recognizes the gentleman from 
Georgia, Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman. Mr. Livingston--
    Mr. Livingston. You understand, Mr. Scott, that I am a 
Georgian.
    Mr. Scott. Oh, very good.
    Mr. Livingston. I hope that will provide me some--
    Mr. Watt. We will probably hold that against you.
    Mr. Scott. That is all the more reason for me to attempt to 
illuminate a little on this issue.
    First of all, I think we have to understand and look at 
this credit report as a discriminatory tool. There is no other 
way you can look at it as that. First, I am not necessarily 
talking about racial discrimination. Not first. But just by the 
very nature that here is a tool in the hands of an interviewer, 
prospective employer whose sole purpose is to make a 
discriminatory conclusion for a job for which this tool has no, 
is no indicator of how successful the individual would be at 
performing that job. That is the first part of the 
discriminatory tool.
    The second one is that it is not required--I don't know, 
maybe you can correct me--that everyone who sits before this 
interviewer, that this credit card issue, this credit report is 
utilized.
    The first question then would be, to you, how heavily do 
employers typically weigh the credit scores in employment? And 
do they use it judiciously, or do they not use it 
discriminatorily? For example, this person who sits before 
them, they may use the credit report as a tool. Another person 
coming before them, they may not. It is all subjective. So when 
you look at all of the ramifications of why this is so wrong, 
it is a discriminatory tool on so many different levels that it 
is paramount, the paramount reason why we feel it is so 
unjustified and so unfair.
    So specifically, my first point to you is, how heavily do 
employers weigh credit scores in employment? What do they do 
with this when they get it?
    A man got behind on his payments and got into a little 
trouble. What do they do with this? How does that weigh in the 
decision?
    Mr. Livingston. It depends on the job. The employers who 
are members of the U.S. Chamber put in safeguards to try to 
protect the applicant or the employee from purposeful 
discrimination, from disparate treatment, from decisions which 
are made based upon the protective classification to make sure 
that everybody similarly situated is treated the same way with 
respect to their credit history information.
    The difficulty, the primary difficulty that I have with the 
bill is that it just doesn't address only the janitor that Mr. 
Watt was referring to. It also throws out the employer's 
ability to look into the way that the potential CFO has managed 
his or her own finances. The hospital that doesn't want someone 
managing the finances of the hospital who has already proved to 
be irresponsible in managing their own money.
    Mr. Scott. But isn't the decision to use this criteria done 
on a case-by-case basis? Does every single person coming before 
for employment go through this?
    Mr. Livingston. No. There are actually two parts to that. I 
think that one of the panelists has already testified, 
consistent with my own experience, that the background 
investigation occurs after the individual has already received 
a conditional offer of employment. So not every applicant would 
be subject to a credit screening. And then, based on my own 
experience, only with respect to those positions for which a 
credit screening might be relevant. Lots of the positions that 
we have talked about here today, in my experience, are not 
subject to a credit screen. When the position itself is subject 
to a credit screen, then everyone who receives a conditional 
offer of employment for that position gets the screen.
    Mr. Scott. But doesn't it vary between that--my time?
    Mr. Cleaver. We have two additional persons to ask 
questions, and because we have a small group here, if it would 
please the members and if the witnesses are willing to wait 
around, we could go through one more round of 2\1/2\ minutes.
    Mr. Scott. You are the chairman, Mr. Chairman.
    Mr. Cleaver. The Chair recognizes the gentleman from Texas, 
Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. I thank the witnesses 
for appearing today. And it is a difficult subject for those of 
us who have sat in the back of the bus, had to go to the back 
door, were forced to sit in the balcony of the movie, last 
hired, first fired. It is a difficult topic for us to embrace 
without some degree of emoting. If you only knew what we think, 
and I thank God that our thoughts are private. That is one of 
the great gifts that God has given humankind, the ability to 
secret your thoughts.
    So, I have a question: Does anyone really think that 
African Americans and minorities are inherently persons who 
merit poor credit scores? If so, would you kindly raise your 
hand? We will call this the voir dire or voir dire portion of 
this hearing, depends on where you are from. It is a French 
term, and lawyers know that it means to speak the truth. Does 
anyone really think that there is an inherent factor here that 
causes minorities and persons of color to have bad credit 
scores?
    I didn't think anyone did.
    So then the question becomes, why do they seem to have 
credit scores that are higher or lower and in this case lower? 
Why are they lower? Why are they consistently lower? What has 
happened in their lives to cause their scores to be 
consistently lower? What happened?
    Are they just bad people who don't care about credit? I 
think not, and I am confident that you would agree with me. So 
what happened?
    I am going to ask my friend, the lawyer from Georgia, what 
happened to Black people? Why is it that their unemployment 
rate is always twice that of White unemployment? Consistently. 
Check the numbers. Consistently twice or more than White 
unemployment. What happened to them? What happened, sir? Help 
me.
    Mr. Livingston. Mr. Green, I think that the majority of 
persons who are denied employment based upon credit screenings 
are White. Now, I believe that--
    Mr. Green. If I may intercede--
    Mr. Cleaver. Let me interrupt everybody. Please move the 
microphone. Our technician is having difficulty picking up your 
voice.
    Mr. Green. Excuse me, since I control the time, and I beg 
your indulgence. But you see, unfortunately, I too have been 
trained, and when you say the majority, I immediately 
understand that we are not talking about majority as much as we 
are talking about percentages of a given group.
    Mr. Livingston. Right. I am not trying to be clever. I am 
just trying to--
    Mr. Green. Whether you are trying to be clever or not, the 
answer is one that has to be addressed. You see, ``most'' does 
not mean that the higher percentage exists compared to the 
number of Whites in the country.
    Mr. Livingston. Indeed. Generally, a higher percentage of 
Blacks, as compared to--
    Mr. Green. And that is what we are talking about. Listen 
now. We are both going to acknowledge our intelligence today. 
On this day, you and I are going to acknowledge that we both 
understand how to use the king's language.
    Mr. Livingston. Indeed.
    Mr. Green. And it was imposed on me, but I still embraced 
it. And I am ready to do battle with whomever comes forward, 
and you and I are here today, my brother. So explain to me, why 
are Black people in this shape that they are in with credit, 
with reference to their credit scores.
    Mr. Livingston. I couldn't explain that to you, Mr. Green. 
But I do say that you have no argument with me over this issue.
    Mr. Green. Let me just ask you this, since you say you 
can't explain. Good, I am glad you said that because listen 
now. Let me just share this with you. Mr. Cohen, whom I must 
tell you I gained a great amount of respect for today, Mr. 
Cohen gave us a plausible answer. He used the term 
``institutionalized racism,'' a term that many persons of color 
are reluctant to use because of the way we have to then find 
ourselves dealing with those who will simply just dismiss us 
out of hand. But I am glad he said it. He has the ``hue'' 
power, if you will, to say it and get away with it. But I want 
to just--
    Mr. Cleaver. The gentleman's time is up, but he has an 
extra 1\1/2\ minutes because he yielded.
    Mr. Green. Just listen to this point. He said 
``institutionalized.'' ``Institutionalized,'' as dastardly as 
it is, is not nearly as dastardly and invidious as 
``legalized.'' This is legalized, and it has always been the 
intelligentsia that was able to perpetuate and perpetrate 
legalized invidious discrimination. Dred Scott was produced by 
the intelligentsia. This that we try to right today, which is 
wrong, the intelligentsia perpetuates.
    I am just going to beg of you, give some thought to those 
of us who have had this history. And we don't come here because 
we just simply want to make things difficult for people. It is 
a history that you cannot imagine how it has impacted us.
    So these hearings are difficult for some of us. And I close 
with the simple comment to all of you, and I appreciate you. 
Please understand that we support the same Constitution you 
support, believe in it the same way you do, except that we can 
recognize a wrong that ought to be righted, and that is what we 
are trying to do today.
    I will yield back the time that I don't have. And I thank 
you for being so kind, Mr. Chairman. Thank you.
    Mr. Cleaver. Mr. Lance, we are going to give another 2\1/2\ 
minutes, if you have a question.
    Mr. Lance. Thank you, Mr. Chairman.
    Mr. Cleaver. We don't discriminate, so we want to make sure 
that both sides have opportunities here.
    Mr. Lance. Thank you. And in my view, Dred Scott was based 
upon an erroneous decision of Roger Taney and eloquently 
opposed by Abraham Lincoln.
    Regarding the testimony of Ms. Wu, I read with interest and 
I certainly agree that if there has been erroneous rates of 
credit, inaccurate rates, that is something that we should 
address. And as I read your testimony, there is a study ongoing 
now regarding that?
    Ms. Wu. The Federal Trade Commission is required under the 
2003 Fair and Accurate Credit Transactions Act that amended the 
Fair Credit Reporting Act to conduct a study of accuracy in 
credit reports. It is a long study. They have engaged in two 
pilots already. The data from the two pilots is what is in my 
testimony, showing error rates in credit reports that I think 
are significant.
    Mr. Lance. And will there be a final report at some point 
in the immediate future?
    Ms. Wu. As I understand it, and this may be a question 
better directed to the Federal Trade Commission, the study is 
ongoing. It is nationwide. They do expect to have a final, a 
statistically significant study in the next few years. I have 
heard within a few years, but I would be happy to find out more 
for you.
    Mr. Lance. Thank you. And through the Chair, I think that 
this is an area that we should investigate and certainly I 
would like to work in a bipartisan capacity with members of the 
committee so that the rates of error are reduced or I would 
hope eventually eliminated, and certainly none of us favors a 
system where there is significant rates of error.
    Thank you, Mr. Chairman.
    Mr. Cleaver. Thank you. We have--Ms. Denston, are you an 
attorney as well? Are you, Ms. Gootkind? Mr. Livingston, I 
guess you are.
    I want to deal with the issues that my colleague Mr. Green 
mentioned earlier about when he actually quoted from Mr. Cohen 
about unintentional but still brutal discrimination, vicious 
discrimination. You agree that there is discrimination?
    Mr. Livingston. Yes, sir.
    Mr. Cleaver. Okay. Here is--maybe you can look at this. Is 
it legal to deny a person employment if they have filed 
bankruptcy?
    Mr. Livingston. I believe that it is illegal to use 
bankruptcy as a basis for an employment decision. But I don't 
know for certain.
    Mr. Cleaver. Okay. I know for certain. You cannot exclude a 
person from employment based on bankruptcy. But it is a moot 
point. If you file for bankruptcy, the chances are you didn't 
pay, you were having difficulty paying your bills. You probably 
didn't have a job. So it doesn't matter. Somebody can say, in 
an interview, I filed for bankruptcy, or show that they filed 
for bankruptcy, an employer can say, we absolutely will not 
discriminate against you because of the bankruptcy. But the 
employer automatically knows that the credit is bad. Do you 
agree with me?
    Mr. Livingston. I think that we end up, we ended up in this 
hearing sort of talking around one another. I agree with most 
of what has been said.
    Mr. Cleaver. Okay. I don't want to talk around it. So if 
you can help me, I will go straight to it.
    Mr. Livingston. Some decisions to deny persons employment 
on the basis of credit history are unlawful under Title VII 
now.
    Mr. Cleaver. Yes.
    Mr. Livingston. Unless the employer can prove that the 
decision was job related for the specific job being sought by 
the applicant. So lots of the examples that I am asked if I 
agree with, I do agree with. My point is that it is illegal now 
and that the current law permits for there to be some 
flexibility so that, as Mr. Lance pointed out, an employer may 
be permitted to look into the credit background of the person 
who seeks to be the chief financial officer of the hospital, 
but might not be able to consider the credit history of someone 
who is seeking a position as a janitor, to draw two extreme 
examples.
    Mr. Cleaver. But you used the word earlier, and I wrote it 
down, ``irresponsible.''
    Mr. Livingston. If I was using it, I was using it with 
respect to the CFO example, chief financial officer example, 
and using, and looking, and asking in some ways rhetorically, 
wouldn't it be job related for an employer to consider if the 
candidate for that senior position, managing the finances of 
the company, was having difficulty managing his or her own 
finances. I wasn't making that reference with respect to lower 
level jobs where it would be less likely that the employer 
could prevail under discrimination laws.
    Bank of America is a good example. Bank of America, based 
on upon what I have heard in this hearing today, lost it under 
current law, which precluded them from considering the credit 
histories in whatever job was at issue.
    Mr. Cleaver. So you are concluding that this legislation is 
completely unnecessary because there is already existing law?
    Mr. Livingston. I said in my testimony that I believe that 
the existing law works better than what would replace it, which 
would be this bill, yes, sir.
    Mr. Cleaver. Why?
    Mr. Livingston. Because this bill throws out, it 
encompasses all situations, including those situations where 
under current law, an employer may be able to show that the 
consideration of certain factors in a person's credit history 
were related to the job that the person sought. And a good 
example I continue to return to is the example offered by Mr. 
Lance, Congressman Lance, that dealt with the CFO of a 
hospital.
    Under current law, the employer would have an opportunity 
to demonstrate that person's credit history was relevant to the 
position and possibly could win. Under the bill, the hospital 
would have no opportunity to make that showing. The hospital 
would not be allowed to consider that information.
    Mr. Cleaver. But do you understand, and Mr. Watt tried, and 
maybe he failed, so I probably will fail as well. Can you 
struggle, struggle, struggle to see that there are individuals 
who are in fact discriminated against, and if you, in the 
throes of a recession have discrimination, that you would say 
it is not based on color, but based on their ability to pay on 
time and not come across as irresponsible. And if you look at 
all of the statistics, Mr. Shelton was one who testified before 
our committee. I think it is inevitable that minorities were 
pushed towards exotic loans. Do any of you disagree with me? 
The facts.
    Mr. Livingston. I passionately agree with the principles of 
equal employment opportunity in Title VII.
    Mr. Cleaver. But then we have to be as aggressively trying 
to make sure that people are not discriminated against as we 
are in a number of other arenas. All of a sudden, it is almost 
like we have solved all of the problems, and there is no 
discrimination, so let's just keep going the way we are going. 
That is not the real world that we are in. And there are 
people, through no fault of their own, today, who are 
struggling just to make it, some of the 99ers who have gotten 
off the unemployment benefits and they are just out here in the 
world. They are not even in the numbers that Mr. Shelton 
mentioned, the 9.6, the 7.1, the 12.0. They are not even in 
there. It is probably up in the 20s. And these people are going 
out trying to get a job. They can't get a job because somebody 
pushed them into an exotic loan.
    My time is way past up. I am going to recognize the 
gentleman from Georgia.
    Mr. Scott. Thank you, Mr. Chairman. And I want to just say, 
Dred Scott was mentioned, and many of you may know that Dred 
Scott is my great-great-grand uncle. And it is a joy to have 
his spirit mentioned because it is his spirit that we are 
dealing with here today.
    The great evolving decision that opened up the major wound 
of this country emanated from the Dred Scott decision as to 
whether a portion of this country or a State would be free or 
slave. And that is why I think you hear the passion from us who 
are descendents of people who have suffered because of the 
pangs of color shock.
    Now, Mr. Livingston, I want to come back to you because I 
want to give an example of this, why I say we all have to see 
out of the same lenses in order to grab this picture.
    When the chairman asked, why do you oppose this, and I 
understand because I feel that you are basically understanding 
of this. But it is very simple to point out something. He asked 
you that and you responded, let me give you this example why I 
am against this bill. I think because of a CFO of a hospital. 
And clearly, in the bill, how the language reads, that there 
are exemptions in this bill, including jobs that require 
national security, FDC clearance, jobs with a State or local 
government agency, that specifically require credit check or 
employment that is supervisory, managerial, professional, 
executive level at a financial institution or is otherwise 
specifically required by law. Almost a loophole in this bill 
that you could drive 20 Mack trucks through. Surely, within 
here, a CFO of a hospital--Grady Hospital should have this. You 
are from Georgia. You know Grady Hospital. You know the trouble 
we went through.
    I agree with you they ought to have checks on that. These 
are guys who are handling a lot of different money from State, 
local, and Federal Governments.
    So the reason of opposition to this bill is on something 
else that we were talking about, is the fact that this 
requirement is a major discriminatory barrier that is a target 
of people who come automatically there and they saw you coming. 
That is why I asked you about case by case.
    There are certain things, if they see a Black man coming, 
sitting down, there is a whole different thing going through 
this person's mind. That is why African-American males right 
now in the cities of the United States are hovering at 50 
percent unemployment. They see them coming. He doesn't have a 
job. If he doesn't have a job, you know he can't pay his bills. 
But he's trying to get a job.
    And this darn thing is sitting up there for them to use as 
a discriminatory tool that he can't get the job. He has a bad 
credit report. He can't pay his bills. He can't pay his bills 
because he can't get a job. This man said you can't get a job 
because you can't pay your bills. There is a catch-22, and it 
needs to be dissected out.
    So I wanted to explain that to you so you could see where 
and how this is a major discriminatory tool. That is why I 
wanted to ask how much weight you give to this, who it is 
applied to. But, clearly, if a person has been unemployed for 
some time, they have trouble paying their bills, and then they 
get this negative effect of credit scores. This is truly a 
consideration of credit scores for employment that is 
counterproductive.
    You can see that, can't you? Can't you see that, how it is 
counterproductive?
    Mr. Livingston. I can see that the use of credit scores in 
many contexts discriminates on the basis of minorities, and my 
testimony pertains to the employment arena, which is what we 
are talking about. There are laws, powerful laws, which 
currently exist that deal with this issue and they work, while 
at the same time giving employers flexibility to deal with 
these more--these other situations that I think we--I think we 
agree. It sounds like we agree that there should be these other 
exceptions.
    Mr. Scott. But I want to make sure that your point is 
covered within the exemptions here and that the fact that as 
this bill moves along, if it is not clear, we will make these 
exemptions clear. The exemptions are clearly--this isn't the 
purpose of the bill. A man gets to the point where he is being 
qualified for the top financial officer or CEO of a major 
hospital--this is going to try to help people who are being 
discriminated against already, who come to the point of wanting 
the job they are discriminated against.
    Mr. Shelton, I wanted to ask you, because I think that you 
can get right to it and explain to us how the use of credit 
scores as a hiring criteria disproportionately discriminates 
against minorities.
    Mr. Shelton. Let me first start off by saying the biggest 
challenge that we have is to talk about credit scores. Credit 
scores are oftentimes a component thereof of a credit report 
but credit scores separately of a credit report is that you 
really don't know.
    Now the reason I put it in those terms is because whenever 
we have talked to the FICOs of the world and other credit 
scoring companies about what exactly goes into the credit 
scoring process, they are unable to tell us. They are unwilling 
to tell us. They will state that we can tell you generally that 
we are looking at your payment history, we are looking at any 
mortgages you have held, we are looking at your background and 
so forth. But when you ask specifically, how do you come up 
with the scoring, they will say we can't tell you because it is 
proprietary. In other words, meaning a black box that locks you 
out of that process.
    As a matter of fact, we have also seen very specifically is 
oftentimes African Americans, with the same background, the 
same history of payments, the same educational level of 
attainment, even the same salary ranges find themselves with 
lower scores than White Americans in the same boat. As a matter 
of fact, the Center for Responsible Lending and a few others 
have taken a good look at this issue and very clearly indicated 
to us there is discrimination in this process.
    Again, as you talk to the people who manage this, they will 
tell you, this is our business and because this is our business 
we can't tell you exactly how we do the mathematics, but 
somehow, magically, African Americans score much lower.
    Mr. Scott. Okay. Thank you, Mr. Chairman.
    Mr. Cleaver. I recognize the gentleman from Texas, Mr. 
Green.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Livingston, I want to make this conspicuously clear. I 
love you. I hold no ill feelings toward you. I would be honored 
if we could have lunch or dinner at my cost. It is not about 
you.
    And, Ms. Gootkind, because you are the person that I would 
be talking to next, I extend the same invitation to you as 
well. I love you, too.
    Now, Mr. Livingston, before we conclude and I go to Ms. 
Gootkind, let me just ask you a question. Is there a 
requirement that you check the credit history of that CEO or 
that hospital person that we have been talking about? Is there 
a requirement that you do it?
    Mr. Livingston. Is there a legal requirement? I don't know.
    Mr. Green. I can tell you. There is no requirement that you 
check it. You may if you choose; and given that you don't have 
to check the history, you now put the person who may be 
discriminated against who had the credit concerns in the 
position of having to sue to prove that this invidious 
discrimination took place, and the person, as has been 
indicated by the testimony I believe of Mr.--I am not sure 
whether it was--was it Mr. Klein? I can't see. Let me just see 
your name. Mr. Klein.
    People don't know always know they have been discriminated 
against. It puts them in the rather awkward position of having 
to do the discovery of some sort to find out they actually have 
a lawsuit. I guess they can go to the EEOC if they have enough 
understanding about what is going on to do so. But it is an 
awful burden. It costs a lot of money to engage in what we call 
long-term litigation, and that is what it is. It is not 
resolved overnight or right away.
    So you put the person who is being discriminated against in 
a position of having to expend a large sum of money or find a 
means by which some lawyer who sees that as his mission or her 
mission in life to help people to do this. It is a tough 
position to be in when you have to prove that you have been 
discriminated against. It really is difficult. Assuming that 
remedy works, it is a very expensive remedy for people to 
prove.
    Ms. Gootkind, am I pronouncing your name correctly, ma'am?
    Ms. Gootkind. ``Gootkind.''
    Mr. Green. ``Gootkind,'' excuse me.
    Ms. Gootkind, I just want to leave you with a thought 
because you are in a position to go back to your board and say 
to them we need to take another look at ourselves. You have an 
opportunity to do some good. Go back to the board and tell them 
that at this hearing, it was made rather clear to me that there 
are some people who look upon us with an eye of suspicion 
because we don't have the diversity that some people think that 
we should have.
    There is something we say around here that might apply to 
your circumstance. I have heard it stated in many quarters if 
you are not at the table--and those people who are on your 
board are at the table--if you are not at the table, you are on 
the menu. Seems like a lot of what you talk about has to do 
with people who are not at the table. So they are at least on 
the agenda which some people call the menu.
    So I look forward to either of you accepting my invitation 
for lunch, and I hope you love me as much as I love you. I 
yield back.
    Mr. Cleaver. One final question, Ms. Denston. Your 
testimony caught me by some surprise. I love you, too, Mr. 
Scott, as you are leaving. Thank you.
    Ms. Denston, you said that you didn't know whether or not 
the use of credit reports for employment purposes has increased 
over the past decade, which is fine, and you added because you 
don't track those numbers.
    Ms. Denston. The use of credit reports has not increased 
from our survey back in 2004. In 2004, it was at 61 percent of 
the selected candidates, and the survey that was took place, 
the one that was released in 2010, was at 60 percent.
    Mr. Cleaver. Okay. Has your industry increased in size in 
the past decade?
    Ms. Denston. I am not aware of those figures. I cannot 
answer that question. I would have no--
    Mr. Cleaver. Has the volume of sales and contracts in your 
industry increased over the past decade?
    Ms. Denston. Again, I cannot answer that question. I don't 
have that information, but we can get back to you on that.
    Mr. Cleaver. Okay. You wouldn't be in business if you had 
not increased.
    Ms. Denston. I can only speak--I work for a private 
individual, and SHRM is an organization I belong to.
    Mr. Cleaver. Okay.
    Ms. Denston. I don't understand your question.
    Mr. Cleaver. The question is, you were saying that you 
didn't know if the credit reports for employment purposes had 
increased, and one of the questions I asked is, has your 
industry increased the volume of sales and contracts? Because 
if everything is increasing, then you are hiring more people, 
and then you are looking at more credit reports.
    Ms. Denston. Okay. I do understand that question. But I 
don't have those figures. I cannot answer that question. I do 
not know. I cannot give you an intelligent answer.
    Mr. Cleaver. Okay. All right. Thank you. Let me thank all 
of you, all the witnesses. We love all of you.
    The Chair notes that some members may have additional 
questions for the witnesses which they may wish to submit in 
writing. Therefore, without objection, the hearing record will 
remain open for 30 days for members to submit written questions 
to the witnesses and to place their responses in the record.
    If no other comments, this subcommittee is adjourned.
    [Whereupon, at 12:12 p.m., the hearing was adjourned.]






                            A P P E N D I X



                           September 23, 2010




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