BILL ANALYSIS
AB 943
Page 1
Date of Hearing: May 13, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
AB 943 (Mendoza) - As Amended: April 14, 2009
Policy Committee: Labor and
Employment Vote: 5-2
Judiciary 7-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill prohibits an employer from using a consumer credit
report for employment purposes, except in certain circumstances.
Specifically, the bill:
1)Allows exceptions to the general prohibition in cases where
the information contained in the report is substantially job
related, meaning that:
a) the position has access to money, other assets or
confidential information; and
b) the person for which the information is being sought is
a manager, an employee of a city or county, a sworn peace
officer or other law enforcement position, a position for
which the information contained in the report is required
to be disclosed by law or to be obtained by the employer.
2)Provides that the state prohibitions do not apply to a person
or business subject to the federal Gramm-Leach-Bliley Act
(governing financial institutions) and implementing
regulations, if the person or business is subject to
compliance oversight by a state or federal regulatory agency
with respect to those laws.
FISCAL EFFECT
Minor costs- less than $50,000 annually - to the Division of
Labor Standards Enforcement and Department of Fair Employment
and Housing for investigation and enforcement of employee
AB 943
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complaints.
COMMENTS
1)Purpose . Supporters (including numerous employee
representatives) argue that, particularly in this economic
climate, a person's credit score says nothing about his or her
character or ability to do a job effectively and responsibly.
Despite this, employers routinely rely on credit scores to
deny employment to those who would have otherwise been offered
employment.
2)Background . Credit reporting activities are regulated by
federal and state law. The federal Fair Credit Reporting Act
(FCRA) regulates how employers may use consumer reports. For
example, the FCRA requires that the employer notify the
applicant and obtain consent for the background check. It an
adverse decision is made based upon the background check, the
employer must provide the applicant notice of the adverse
decision and the name, address, and telephone number of the
consumer reporting agency making the report. The employer is
also required to give the employee a copy of the report and
information on how to dispute the contents of the report.
California's Consumer Credit Reporting Agencies Act (CCRAA),
the state's counterpart to the FCRA, generally regulates
consumer credit reporting agencies. Among other things, the
CCRAA requires every consumer credit reporting agency to allow
a consumer, upon request and with proper identification, to
visually inspect all files pertaining to him or her that the
agency maintains at the time of the request. The CCRAA
permits consumers to dispute inaccurate information and
requires a consumer credit reporting agency to reinvestigate
disputed information without charge.
In the past, generally only banks and financial service
companies routinely ran credit checks on potential employees.
But employers in other sectors increasingly are including
credit checks in the screening process presumably to assess
applicants' honesty and integrity, among other traits.
3)Prior legislation . This measure is similar, but not identical
to, AB 2918 (Lieber) from last session. AB 2918 amended the
CCRAA to prohibit, except as specified, the user of a consumer
credit report from procuring a consumer credit report for
employment purposes unless the report is either substantially
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job related, as defined, or required by law to be disclosed to
or obtained by the use of the report. AB 2918 was vetoed by
Governor Schwarzenegger, who stated the 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."
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081