Reviews | How companies keep their own workers in debt

This exploitation reflects the worrying emergence of a new threat to Americans who are already struggling to make ends meet: debt imposed by companies on their own workers or assumed by workers as a condition of getting the job done.

Gig economy drivers often finance their cars through expensive subprime auto loans or through “buy here, pay here” car dealerships that offer high interest rates, sometimes charging more than value. of the car and can even place a device on the car to deactivate it if a payment is missed. Amazon employees can use “Anytime Pay” to access their wages a few days earlier, and other companies offer similar programs; these may turn out to be, functionally, short-term loans with unforeseen charges. Meanwhile, immigrant nurses remain trapped in their jobs with the threat of owing their employer thousands of dollars if they quit too soon.

We generally view the debt that ordinary people and families owe to businesses as a consumer problem, but in today’s market it causes distinct harm to workers as workers. Very often, employer debt holds workers hostage in their work and undermines their bargaining power to get a better deal.

President Joe Biden is pledged to be the most pro-worker leader this country has known in years, and luckily he can use the authority of the federal government to tackle these abuses even without action on the part of the government. ‘a blocked Congress.

A simple but powerful solution is to ask some key agencies, including the Consumer Financial Protection Bureau and the Department of Transportation, to set up dedicated worker protection offices. Such a measure would ensure that abusive situations between workers and consumers are dealt with in a systematic and routine manner – not just through one-off cases – and would constitute a major recognition that worker protection must be different in the economy. today.

Action by the Department of Transportation would be particularly helpful as these problems are endemic in the trucking industry. Some long-haul trucking companies provide drivers with exorbitantly expensive but insufficient training and require them to sign “training reimbursement agreements” so that if the drivers leave the company before a set time, they have a thousands of dollars in debt to the company. In a court case, the debt to trucking giant CRST stood at $ 6,500, far more than the actual cost of the training. Seth Frotman, executive director of the Student Borrower Protection Center, called these predatory training loans “ghost student debt.” Like other private student loans, this is debt incurred by people seeking training to learn and advance in their careers, with the added problem of putting workers in debt to their employers and keeping them trapped. in their jobs. Truck drivers are also often attracted to predatory lease-to-own programs that promise vehicle ownership – again, funded by payroll deductions – that do not result in ownership at all.

Action by the Consumer Financial Protection Bureau would also be helpful. Employer debt can also be used to subsidize insufficient wages or unpredictable hours. Small cash advance and loan programs that allow workers to borrow from their employers to pay rent or put food on the table can involve interest rates and hidden charges that force workers to pay rent. get into debt with their employers. Likewise, workers faced unexpected overdraft fees and other charges when employers started paying wages with payroll cards (like debit cards) several years ago.

In addition to its general predatory nature, the type of loan at the heart of workplace scams is often discriminatory. (In the case of concierge franchise in Washington, the company targeted immigrants). Much like the inverted red line in which providers of bad credit products target people of color, predatory businesses often target black and brown immigrants and workers by providing bogus opportunities to access the American Dream.

When businesses convert their workforce into consumers or debtors in these types of scams and schemes, business misconduct can easily slip through the cracks of our regulatory and enforcement systems. But that doesn’t have to be the case.

The creation of a worker protection office at CFPB would be fully in line with the agency’s mission to protect people against unfair, deceptive or discriminatory financial products. The CFPB has a long list of important priorities to address, but the past two years in the midst of the pandemic have highlighted and exacerbated the power asymmetry between businesses and ordinary citizens, both in their capacity as workers, consumers or both. Corporate abuses of power don’t always fit in neat boxes, so agencies tasked with leveling the playing field in the marketplace should take a broad view of their mission.

And the CFPB has already shown the value of appointing a position within an agency focused on a specific subject. During the Obama administration, under the Dodd-Frank Act, the CFPB created a student loan ombudsperson who gathered data, made policy recommendations, and helped fight illegal service practices, including a 2017 CFPB case against the country’s largest student loan company. Similar examples abound in state and local governments, from the state attorney general’s offices that have created dedicated work units, to the establishment of immigrant affairs offices in New York and other major cities. A dedicated office is a sure way to make sure the job gets done and keeps getting done.

A CFPB worker protection office could enforce applicable laws and protect worker-consumers from predatory practices. It could study and publish reports on these subjects. It could work with enforcement partners such as the Department of Labor, the DOT, and the Federal Trade Commission to tackle interrelated issues, including labor market antitrust violations, wage theft, misclassification of workers, discrimination, labor trafficking and consumer credit abuse resulting from employer inducement of debt.

Likewise, the DOT could create an office focused on the protection of workers in different transport sectors, including truck drivers subject to abusive reimbursement agreements for training or hire-purchase, as well as other predatory practices. (A worker protection office at DOT could also help address other unrelated issues, from a shortage of rest areas on freeways to ensuring Covid safety at airports and on airplanes). Labor and Transport departments are already collaborating on worker-focused efforts: In July, Labor Secretary Marty Walsh and Transportation Secretary Pete Buttigieg co-hosted an event and co-wrote an op-ed on the topic. Creating a long-term worker protection unit within DOT would improve working conditions and help the agency create more attractive and sustainable careers for transport workers. It would also improve travel safety for all.

The creation of dedicated units or ombudsman positions within CFPB, DOT and other relevant agencies would mainstream the concerns of workers within these offices, so that summary financial products or other new practices are exploitation will not go without consequences. It would also ensure that workers remain at the forefront of the federal government’s mission and help Biden realize the holistic pro-worker vision he championed.