Skip to main content

The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets

System Working Paper 17-17 | Published June 16, 2017

Download PDF

Authors

Kristle Cortés Federal Reserve Bank of Cleveland

Andrew Glover Federal Reserve Bank of Kansas City

Murat Tasci Federal Reserve Bank of Cleveland

The Unintended Consequences of Employer Credit Check Bans on Labor and Credit Markets

Abstract

Since the Great Recession, 11 states have restricted employers’ access to the credit reports of job applicants. We document that county-level vacancies decline between 9.5 percent and 12.4 percent after states enact these laws. Vacancies decline significantly in affected occupations but remain constant in those that are exempt, and the decline is larger in counties with many subprime residents. Furthermore, subprime borrowers fall behind on more debt payments and reduce credit inquiries postban. The evidence suggests that, counter to their intent, employer credit check bans disrupt labor and credit markets, especially for subprime workers.