WASHINGTON—The Consumer Financial Protection Bureau has launched an inquiry into practices and financial products that it is alleging may leave employees indebted to their employers.
In a Request for Information, the CFPB said it is seeking data about, and worker experiences with, emerging practices and financial products referred to as “employer-driven debt.”
“The CFPB is interested in knowing whether consumers have a meaningful choice in accepting employer-driven debt products,” the Bureau said. “The CFPB also wants to understand the terms and conditions for these products, including whether they might impede someone from seeking a better-paying job.”
According to the Bureau, although it may take other forms, employer-driven debt can cover an array of products and practices, including an employee’s up-front purchase of equipment and supplies that is essential for their work or that the employer requires. In other instances, workers may have to agree to debt products where the debt must be repaid if the employee leaves the employer before a certain date. For example, a company may provide training to a new hire, and require that the training’s cost be paid back if the employee leaves or is fired within a set period, the CFPB explained.
Employer-driven debt comprises an emerging set of products and services that the CFPB said it will study to better understand the potential impact on individual borrowers, jobseekers, and the broader labor market.
Potential Areas of Focus
Some potential areas of focus for the CFPB include:
- Workers’ understanding of employer-driven debt arrangements. “Workers may not understand that these arrangements involve an extension of credit, and they may not know whether they have the ability to comparison shop for credit offered by others or whether entering into the debt agreement is a condition of employment.”
- How and whether default on employer-driven debt could threaten continued or future employment. “This includes understanding whether the status of the debt may impact a decision to seek alternative employment. These potential risks might limit competition in the labor market and in the market for similar consumer financial products and services.”
The deadline to submit comments to the CFPB’s inquiry is 90 days after the Request for Information’s publication in the Federal Register.
Read the request for Information Regarding Employer-Driven Debt.
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