Report: Training Repayment Loans Can Harm Workers

Consumer Bureau study highlights risks of employer-driven debt

A new report released by the Consumer Financial Protection Bureau (CFPB) indicates that workers face significant risks from employer-driven debt, such as debt incurred through Training Repayment Agreement Provisions (TRAPs). This debt can be the result of employer requirements for equipment purchases or agreements that training costs must be repaid if an employee leaves a position before a certain date.

“Employer-driven debt poses the risk of suppressing wages and forcing workers to stay in jobs they do not want,” said CFPB Director Rohit Chopra. “When it comes to consumer lending, federal law protects Americans even when they are on duty at work.”

Companies use TRAP provisions to 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. In some instances, workers may have to agree to debt products where the debt must be repaid if the worker leaves the employer before a certain date.

The CFPB report highlighted three specific risks of TRAP provisions, including:

• Workers are rushed through the loan sign-up process: Workers report that employers may coerce employees to incur debts as a precondition of employment. Some employers even use high-pressure tactics, such as leaving workers with the impression that the job opportunity would not be available if they took time to carefully review and consider loan and contract terms.
• Employers use bait-and-switch fine print: When commencing employment, employees are required to sign paperwork that appear to allow the employer or issuer to unliterally change the terms and conditions of the financial product without worker consent or awareness.
• Employer-driven debt puts up barriers to career advancement and higher wages: 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. This can impede labor mobility and dissuade employers from raising wages to retain employees. TRAPs, and other forms of employer-driven debt, can have effects similar to non-compete agreements.

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