California Restricts Employers’ Use of Consumer Credit Reports Effective January 1, 2012

by Sayema Hameed

Assembly Bill 22, signed into law by Governor Brown, restricts the use of consumer credit reports by employers.  Effective January 1, 2012, employers and prospective employers (excluding certain financial institutions) will be prohibited from obtaining or using consumer credit reports about employees or job applicants, with limited exceptions.  This law carves out exceptions for the use of consumer credit information by employers for persons in the following positions:

• (1) a position in the California Department of Justice;
• (2) a managerial position, as defined;
• (3) a sworn peace officer or other law enforcement position;
• (4) a position for which the information contained in the report is required by law to be disclosed or obtained;
• (5) a position that involves regular access to a person’s personal bank or credit card information for any purpose (other than the routine processing of credit card applications in a retail establishment);
• (6) a position in which the person is or would be a named signatory on the employer’s bank or credit card account, or authorized to transfer money or enter into financial contracts on the employer’s behalf;
• (7) a position that involves access to confidential or proprietary information, defined as a “trade secret” under California Civil Code Section 3426.1(d);
• (8) a position that involves regular access to $10,000 or more cash belonging to the employer, customer or client.

Before obtaining a credit report for an employee or applicant, an employer must provide a written notice to the employee or applicant specifying the specific reason(s) for seeking the report, informing the person of the source of the report, and providing a box to check to request a free copy of the report.