This exploitation reflects the troubling emergence of a new threat to Americans already struggling to make ends meet: debt imposed by companies on their own workers or taken on by workers as a condition of doing the job.
Gig economy drivers often finance their cars through costly sub-prime auto loans or through “buy here pay here” car dealers that offer high interest rates, sometimes charge prices higher than the car’s value, and may even place a device on the car to disable it if a payment is missed. Amazon workers can use “Anytime Pay” to access their wages a few days early, and other companies offer similar programs; these can turn out to be, functionally, short-term loans with unexpected fees. Meanwhile, immigrant nurses remain trapped in their jobs by the threat of owing their employer thousands of dollars if they quit too soon.
We typically think of debt that ordinary people and families owe to corporations as a consumer problem, but in today’s marketplace, it causes distinct harm to workers as workers. Very often, employer-driven debt holds workers hostage in their jobs and undermines their bargaining power to get a better deal.
President Joe Biden has vowed to be the most pro-worker leader this country has seen in years, and fortunately, he can use the authority of the federal government to address these abuses even without action from a gridlocked Congress.
One simple, yet powerful solution is to direct certain key agencies, including the Consumer Financial Protection Bureau and the Department of Transportation, to create dedicated offices for worker protection. Such a move would ensure that abusive worker-consumer situations are systematically and routinely addressed — not just through one-off cases — and would serve as a major acknowledgment that worker protection must look different in today’s economy.
Action at the Transportation Department would be particularly useful because these problems are endemic in the trucking industry. Some long-haul trucking companies provide exorbitantly priced yet insufficient training to drivers and require them to sign “training repayment agreements,” so that if drivers leave the company before a set time, they are thousands of dollars in debt to the company. In one court case, the debt owed to trucking behemoth CRST was $6,500, far more than the training’s actual cost. Seth Frotman, executive director of the Student Borrower Protection Center, has described such predatory training loans as “shadow student debt.” Like other private student loans, this is debt incurred by people seeking training to learn and advance their careers, with the added problem of placing workers in debt to their employers and keeping them trapped in their jobs. Truck drivers are also often drawn in by predatory lease-to-purchase schemes that promise vehicle ownership — again, financed through pay deductions — that don’t result in ownership at all.
Action at the Consumer Financial Protection Bureau would be helpful as well. Employer-driven debt can also be used to subsidize insufficient wages or unpredictable scheduling. Cash advance and small dollar loan programs allowing workers to borrow from their employers to pay the rent or put food on the table can involve hidden interest rates and fees that force workers into a debt spiral with their employers. Similarly, workers found themselves saddled with unexpected overdraft fees and other charges when employers began paying wages with payroll cards (like debit cards) a number of years ago.
In addition to its general predatory nature, the type of lending at the core of workplace scams is often discriminatory. (In the Washington janitorial franchise case, the company targeted immigrants). Much like reverse redlining in which purveyors of bad credit products target people of color, predatory companies often target immigrants and Black and brown workers by offering sham opportunities to access the American dream.
When corporations convert their workforce into consumers or debtors in these types of scams and schemes, the company’s misconduct can easily fall through the cracks of our regulatory and enforcement schemes. But that doesn’t have to be the case.
Establishing an office for worker protection at the CFPB would be firmly in line with the agency’s mission of protecting people from financial products that are unfair, deceptive or discriminatory. The CFPB has a long list of important priorities to address, but the past two years amid the pandemic have highlighted and exacerbated the asymmetry of power between corporations and ordinary people, whether in their capacity as workers, consumers or both. Corporate abuses of power don’t always fit in tidy boxes, so agencies charged with leveling the playing field in the marketplace should take an expansive view of their mission.
And the CFPB has already shown the value that comes with designating a position within an agency focused on a specific topic. During the Obama administration, pursuant to the Dodd-Frank Act, the CFPB created a Student Loan Ombudsman position that gathered data, made policy recommendations and helped spur enforcement against illegal serving practices, including a 2017 CFPB case against the nation’s largest student loan company. Similar examples abound in state and local government, from state attorney general offices that have created dedicated labor 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 work gets done and keeps getting done.
A CFPB worker protection office could enforce the applicable laws and protect worker-consumers from predatory practices. It could study and issue reports on these topics. It could collaborate with enforcement partners like the Department of Labor, the DOT and the Federal Trade Commission to tackle interrelated problems including antitrust violations in the labor market, wage theft, worker misclassification, discrimination, labor trafficking and consumer finance abuses arising from employer-driven debt.
Similarly, the DOT could create an office focused on protecting workers in the various transportation sectors, including truck drivers subject to abusive training repayment or lease-to-own agreements, as well as other predatory practices. (A worker protection office at the DOT could also help with additional unrelated issues, from the dearth of highway rest stops to ensuring Covid safety in airports and on planes). Already the Departments of Labor and Transportation are collaborating on worker-focused efforts: in July, Labor Secretary Marty Walsh and Transportation Secretary Pete Buttigieg co-hosted an event and co-authored an op-ed on this subject. Creating a long-term worker protection unit in the DOT would improve labor conditions and help the agency build more appealing and sustainable careers for transportation workers. It would also improve travel safety for everyone.
Creation of dedicated units or ombudsman positions in the CFPB, DOT and other relevant agencies would embed worker concerns within these offices, so that sketchy financial products or other new exploitative practices will not skate by without consequence. Doing so would also ensure workers remain front and center in the federal government’s mission and help Biden to realize the holistic pro-worker vision he has championed.