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CFPB Report Shows Workers Face Risks from Employer-Driven Debt [1]

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Date: 2023-07-22

The Consumer Financial Protection Bureau (CFPB) launched a formal inquiry in June 2022 to seek more information about employer-driven debt.

Employer-driven debt is a form of debt that is tied to a worker's employment. It can cover a variety of products and practices, such as the worker's up-front purchase of equipment and supplies that the employer requires. TRAPs are a common form of employer-driven debt, in which companies require workers to agree to pay back the purported costs of training if they leave their jobs before the end of a contractual commitment period.

The responses to the inquiry highlighted numerous ways workers experience unique harms related to employer-driven debts. These harms include:

Workers are rushed through the loan sign-up process, and employers may coerce employees to incur debts as a precondition of employment.

Employers use bait-and-switch fine print, which allows them to unilaterally change the terms and conditions of the financial product without worker consent or awareness.

Employer-driven debt can put up barriers to career advancement and higher wages.

The CFPB is concerned about the potential risks of employer-driven debt to consumers and is considering taking action to protect workers.

Employer-driven debt can be difficult to understand, and workers may not fully understand the terms and conditions of the debt before they sign up for it.

Employer-driven debt can trap workers in low-paying jobs, as they may be unable to leave their jobs without incurring large repayment costs.

Employer-driven debt can have a negative impact on workers' credit scores, making it more difficult for them to get loans or credit cards in the future.

CFPB Press Release

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