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

Listed author(s):
  • Kristle Cortes

    ()

    (Federal Reserve Bank of Cleveland)

  • Andrew Glover

    ()

    (The University of Texas at Austin)

  • Murat Tasci

    ()

    (Federal Reserve Bank of Cleveland)

Registered author(s):

    Lenders have traditionally used credit reports to measure a borrower’s default risk, but credit agencies also market reports to employers for use in hiring. Since the onset of the Great Recession, eleven state legislatures have restricted the use of credit reports in the labor market. We document that county-level unemployment rose faster in states that restricted employer credit checks and counties with more sub-prime citizens experienced larger increases in the unemployment rate than average. Using data from individual credit reports, we find that access to credit declines and delinquencies increase significantly after the state-level policy changes, especially for subprime borrowers.

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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1702.pdf
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    Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1702.

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    Length: 29 pages
    Date of creation: Jan 2017
    Handle: RePEc:koc:wpaper:1702
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