RSSEmployer-driven debt is keeping employees from leaving for better-paying positions and leaving them beholden to a separate lender, according to a recent Consumer Financial Protection Bureau report.
The CFPB had launched an inquiry seeking more information about employer-driven debt in June 2022. According to the agency, employer-driven debt can include worker’s upfront purchase of required supplies and equipment. Companies reportedly use such provisions to require workers to pay back the costs of training if they leave their positions before their contractual agreement ends, while employers were allowed to unilaterally change the conditions of the financial product without employee consent.
According to the report, workers felt rushed through the loan signup process, and employers allegedly coerced employees to incur debt as a precondition of employment. Others reportedly used pressure tactics in getting employees to sign.
“Despite it often being sold to workers as a way to increase earnings and career mobility, employer-driven debt may be structured in ways that require employees to make large payments upon separation,” the CFPB added. “This can impede labor mobility and dissuade employers from raising wages to retain employees.
“Employer-driven debt poses the risk of suppressing wages and forcing workers to stay in jobs they do not want,” added CFPB Director Rohit Chopra. “When it comes to consumer lending, federal law protects Americans even when they are not on duty at work.”
