Employers Use Tricks to Ensnare Workers in ‘TRAP’ Debt, CFPB Says

Employers are increasingly ensnaring workers into debts for training and equipment that can make career advancement more difficult, the Consumer Financial Protection Bureau said.

Companies in a variety of sectors, including nursing, retail, and trucking, require new workers to pay for tools or training as they begin employment. But disclosures about the costs often aren’t clear or made in a take-it-or-leave-it fashion that doesn’t give workers a choice about whether to undertake the training, the CFPB said in a Thursday report.

“When it comes to consumer lending, federal law protects Americans even when they are on duty at work,” CFPB Director Rohit Chopra said in a statement.

The CFPB, which launched an inquiry into employer-driven debt in June 2022, is particularly concerned about training repayment agreement provisions (TRAPs). These provisions require workers to repay the training costs if they leave their jobs before reaching the end of a mandatory commitment period.

TRAPs, which began appearing in the 1990s, had previously been used for high-skilled jobs like airline pilots and engineers. They’ve now spread to lower-skilled and lower-paid jobs in retail, healthcare, and transportation, the CFPB said.

In one instance cited by the report, a hospital ordered an imminently departing nurse to pay $18,000 to cover training costs. The nurse elected not to switch jobs because of the financial burden, the CFPB said.

The CFPB also raised concerns that disclosures about training costs were buried in company onboarding documents and easily missed during the hiring process.

The CFPB report showed that TRAPS reduce worker mobility and bargaining power, advocates for student borrowers said.

“The largest corporations in America are now on notice: the use of TRAPs and other predatory contract terms must stop,” Persis Yu, deputy executive director of the Student Borrower Protection Center, said Thursday in a statement.

Industry groups questioned whether the CFPB had the authority to look into the costs of job training. The National Federation of Independent Business, a trade group representing small business, said in a comment letter that the Department of Labor and the Education Department were the appropriate agencies to review job training costs.

The American Trucking Association said in its comment letter that disclosures about training costs were clear and easily understandable.

“It is, in fact, the government, through mandatory licensing requirements, that creates the need for the training. Thus, considering training in these contexts to be ‘employer-driven’ is, at best, a misnomer,” the trucking trade group letter said.