10/1/2008 Update: California Bill to Limit Credit Reports Vetoed

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We reported last month that California Assembly Bill 2918 was dangerously close to becoming a critical issue for those who employ people in California. The bill sought to severely restrict employers’ ability to use Credit Reports when making hiring decisions.

The bill made it all the way to Governor Arnold Schwarzenegger’s desk and in a stunning turn of events, he vetoed it saying, “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.”

According to the National Association of Professional Background Screeners (NAPBS) “This bill would prohibit the user of a consumer credit report, with the exception of certain financial institutions, from obtaining a consumer credit report for employment purposes unless the information is (1) substantially job related, meaning that the information in the consumer credit report relates to the position for which the person who is the subject of the report is being evaluated because the position is a highly compensated or managerial one , or (2) required by law to be disclosed to or obtained by the user of the report.

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