Credit Report Bill Passes Assembly Judiciary Committee

AB 22 (Mendoza), a bill banning most employers from using consumer credit reports for employment purposes, passed the Assembly Judiciary Committee this past Tuesday.

AB 22 limits employers’ ability to use consumer credit reports for legitimate employment purposes, unless the information in the report is “substantially job-related.”  The bill narrowly defines that term to refer only to managerial positions; employees of the state Department of Justice; law enforcement; certain financial institutions; or a position for which a report is required by law.

A coalition of credit reporting agencies, business associations, and manufacturing groups strongly opposes this measure.  Witnesses in opposition to the bill testified that employers normally use credit reports when narrowing an applicant pool during the hiring process.  The reports provide objective information about an individual, confirming identification, employment history, collection or delinquency status, and overall management of the person’s finances.  These elements, allow employers to gauge a person’s trustworthiness and overall responsibility before offering an applicant employment.  Opponents argued that police departments make use of credit reports for similar reasons.

Opponents further argued that, while AB 22 still allows some entities to use credit reports, the bill bans use of the reports in nearly all areas of the private job sector.  The measure allows an employer to pull a credit report for a managerial position who has direct access to financial information assets and property.  That fails to recognize is that there are numerous positions in the private sector that are non-managerial positions that have direct access to financial information, cash, confidential information, and assets of the employer and the public.  Thus, not only does AB 22 impede employers from gauging the trustworthiness and responsibility of a job candidate, it also puts employers and the public’s financial information at risk.

This bill is also opposed by a number of apartment associations representing owners and managers of rental units across the state.  These associations share the concerns of the coalition with respect to restrictions on evaluating potential employees, and also argue that the bill may expose tenants and others to an increased risk of theft or other harm if unscrupulous employees inappropriately misuse their access to a tenant's personal information or home.  For example, the California Apartment Association states "Many employees have access to tenants' rental units.  Information contained on a credit report can be useful to evaluate whether an applicant might be in a situation that would lend itself to dishonest activity either in the role of fiduciary or while in another person's home."

At the hearing, Assemblyman Mendoza said he was working with the apartment associations and will take an amendment in the next committee exempting apartment managers from the prohibition on the use of the credit reports for employment screening.

AB 22 passed the hearing with a vote of 6-4.  It will be heard in the Assembly Labor & Employment Committee on April 13, 2011

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