Use of consumer credit reports

By CMTA Staff

Capitol Update, Sept. 25, 2009 Share this on FacebookTweet thisEmail this to a friend

A bill that would prohibit the use of consumer credit reports when hiring now sits on the Governor’s desk for review.  If signed, AB 943 (Tony Mendoza, D-Artesia) would restrict employers from using legitimate information related to employment issues and exposes employers to undue liability.

AB 943 prohibits employers from using consumer credit reports for employment purposes unless the information is "substantially job related," as defined, including positions that handle cash, other assets, or personal information, and at least one of the following conditions: managerial, municipal, sworn peace officer or other law enforcement, or as otherwise required by law.

Current law allows for the procurement and use of these reports under the following conditions:
  •     Prior to requesting a consumer credit report, an employer must provide a written notice stating the source of the information and how it will be used;
  •     Provide a copy of the consumer credit report to the consumer, if desired; and
  •     If an adverse employment action is taken against a person due to the information contained in a consumer credit report, the user must provide the name and contact information for the reporting agency to the consumer.

While a person’s credit history by itself is not predictive of future actions, access to credit information can reveal patterns that may present an unreasonable risk to businesses. Employee theft is a growing problem. The U.S. Chamber of Commerce rates the annual cost at $40 billion. According to the Federal Bureau of Investigation, this is the fastest growing crime in the United States and many experts estimate that it increases at a rate of 15 percent annually. On average, businesses lose as much as two percent of sales to employee theft.

The April 14th amendments of AB 943 strongly mirror language from AB 2918 (2008) that was vetoed by Governor Schwarzenegger. In his message the Governor stated:

    This bill would significantly increase businesses' exposure to civil actions over the use of credit checks. Further, the bill would increase administrative costs to those employers who must legitimately use credit reports as a screening tool by requiring that the employer first abide by its onerous requirements. California employers and businesses have inherent needs to obtain information about applicants for employment. The bill would become a new employer obstacle to the use of available information needed to make hiring decisions.

In its current form AB 943 goes even further than did AB 2918. For any employer the risk created by AB 943 represents a major liability that discourages business growth in California. We believe this bill unduly restricts the ability of businesses to use all legally available information in employment decisions and for these reason CMTA has strongly opposed and has urged the Governor to veto it.  

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