California AB943 Threatens Use of Credit Reports . . . Again

Nick Fishman

In October, 2008 California Governor Arnold Schwarzenegger vetoed Assembly Bill 2918, a law aimed to ban the employers from using employment credit reports when conducting background checks. At the time, he said, “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.”

Well, here’s hoping that the Governor hasn’t changed his mind. It looks like the House Assembly is at it again with AB943, a bill which is the mirror image of its predecessor.

According to the Consumer Federation of California, “This bill would prohibit an employer, 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 position of the person for whom the report is sought has access to money, other assets, or confidential information, and (2) the position of the person for which the person is sought is a managerial position, a position in a city, county, or both city and county, that of a sworn peace officer or other law enforcement position, or a position for which the information contained in the report is required to be disclosed by law or to be obtained by the employer. “

The National Association of Professional Background Screeners (NAPBS) has drafted the following letter and asked its members to send it to the Governator. Check out the letter and feel free to send one of your own. Feel free to take whatever language you’d like. We’ll continue to keep you posted.

Governor Arnold Schwarzenegger State Capitol Building Sacramento, CA 95814

Dear Governor:

We strongly oppose California AB 943, and we urge a veto.

We are a member of the National Association of Professional Background Screeners (NAPBS) which represents over 600 member companies and seeks to foster awareness of issues related to consumer protection within the background screening industry. The background screening industry is governed by the federal Fair Credit Reporting Act (“FCRA”) under the scrutiny of the Federal Trade Commission (“FTC”). Background screeners are classified as Consumer Reporting Agencies (“CRAs”) by the FCRA and differ from private investigators who may conduct investigations covertly.

Background screening companies receive personal data provided by the applicant with that person’s written consent to utilize it and CRAs follow the FCRA regulated process for verifying and reporting results. This includes the right of the applicant to review and dispute adverse information reported in the background check. In addition, applicants applying for jobs in California have additional protections granted under California state law.

NAPBS has numerous member companies in California that provide employment and tenant background screening services to both California employers and property management companies; these services may include providing a consumer credit report. Additionally, NAPBS membership spans each state in the nation and members based outside of the state of California also provide such services to California employers and property management companies.

AB 943 would enact an unreasonable prohibition against the use of information that is critical in many business situations. In fact, this bill may have the unintended consequences of increasing identity theft and embezzlement. This is due to the fact that AB 943 eliminates a business’s ability to reasonably access critical information that may indicate the prospective employee’s level of responsibility with respect to financial management over time.

NAPBS and its members are aware that in these trying times, many Californians may be experiencing financial hardship, which might result in negative information in a credit report; however, credit reports generally cover information for a 7 year period and, as such, problems that are not endemic to this current situation but represent a longstanding pattern of behavior on the part of the applicant should be apparent to an employer. Moreover, in the employment context, prior to taking an adverse action based on information in a consumer report, an employer must under federal law provide the applicant an opportunity to explain or dispute information.

Conclusion: The continued use of credit reports is important to our business and those of our clients. We obtain a consumer credit report only after the consumer has provided written authorization. We believe that many of the concerns raised with respect to the current financial crisis are misplaced given the process provided to applicants to dispute and explain as well as the length of time for reported information. We strongly urge a veto on California AB 943.

Nick Fishman
Follow Me

Nick Fishman

Nick Fishman is the co-founder of EmployeeScreenIQ, a leading, global employment background screening provider, and serves as the company’s executive vice president and chief marketing officer. He pioneered the creation of EmployeeScreen University, the #1 educational resource on employment background checks for human resources, security and risk management professionals. A recognized industry expert, Nick is a frequent author, presenter and contributor to the news media. Nick is also a licensed private investigator in the states of Ohio and Texas.
Nick Fishman
Follow Me
Tweet
Share
Email
Share
  • Ray

    The credit history has no bearing on individual to do the job. If the applicant is qualified, competent, and capable of performing the task, the employer should not use credit history as basis in hiring. Let us not forget that the applicant is not looking for credit application to purchase material needs but rather looking for a job to support himself, support the family, and above all to bring food in the dining table.