Bill to ban employer FICO use

JUNE 11, 2010


“Should employers be banned from using information found in consumer credit reports to help make employment decisions?” was the key question in the Senate Committee on Labor and Industrial Relations on Wednesday.

In what is described as “Expanded Employer Liability,” the bill potentially increases the liability exposure of employers, by restricting the ability of employers to use consumer credit reports as part of job applicants’ background check process.

Existing law allows employers to use credit reports for the pre-employment process.

AB482 author, Tony Mendoza, D-Artesia, told the committee that employers discriminate against English learners and low-income applicants when using credit information during the hiring process.

Mendoza had an almost identical bill vetoed last year by Gov. Arnold Schwarzenegger. Last year, Schwarzenegger vetoed AB943, saying it would hinder business, with the message that employers have specific needs in obtaining information about applicants for employment and acknowledged in a statement that he had already vetoed another similar bill (AB2918, Sally Lieber, D-San Jose) in 2008. And, In 2005, a similar bill was withdrawn by author Senator Martha Escutia, D-Whittier, (SB986).

Mendoza’s bill would prohibit an employer from obtaining a consumer credit report for employment purposes unless the information is “substantially job-related.” Interestingly, Mendoza’s bill lists a few exemptions including the Department of Justice, managerial positions, peace officers and law enforcement.

“When I first initiated the bill, the unemployment rate was 11.5 percent. Now, it’s 12.5 percent,” Mendoza said in the hearing. “This bill will remove an unnecessary barrier to employment for those seeking everyday work opportunities.”

The California Chamber of Commerce appeared in opposition to the bill. Its representative explained that job applicants’ FICO scores do not appear anywhere on the credit report obtained by the employer, and stressed that employers need the information for many job positions, and not just those involved with money.

Michael Belote, representing the California Employment Law Council  (CELC), appeared in opposition to Mendoza’s bill and said that if passed, it could force employers into more litigation. Belote asked why employers would take the time and expense to order and pay for credit reports unless they thought it necessary and relevant to the job.

Mendoza argued that employers are using credit reports as a way of getting rid of unwanted workers.

The California Joint Powers Authority requested a blanket exemption, explaining that their employees are public employees and have access to cash, checks and money.

The Apartment Associations of Orange County and Southern California Cities appeared in opposition and explained that their employees are not just in management positions, and handle cash, checks and have access to credit information. The associations were concerned that the bill would prevent them from obtaining credit reports on people who process money, as well as the private and highly confidential information of renters.

The California Independent Grocers Association and Association of Licensed Investigators also appeared in opposition to the bill.

Sen. Mark DeSaulnier, D-Concord, the committee chairman, indicated said the bill still needed work even though he was inclined to support it.

Mendoza said he was trying to lower the hurdles that people seeking work must face. Mendoza said that employers use credit report to “keep people out,” and then don’t have to tell applicants why they did not get the job. He said, “AB 482 is another way to protect employees.”

Mendoza appeared to contradict himself, when he said that employers are already sued for refusing to hire job applicants based on credit reporting. He suggested that employers should use background checks instead of credit reporting. DeSaulnier disagreed, saying that background checks prove problematic as well and can be inaccurate.

According to the written staff analysis, the Equal Employment Opportunity Commission (EEOC), employers who use credit checks may be violating Title Vll by discriminating against race and national origin discrimination when using credit reports in hiring decisions.

There have been two federal bills introduced preventing employers from using credit checks “for the purposes of making adverse employment decisions.” HR3149 is currently pending in the House Committee on Financial Services, and SA3795 has pending amendments. Both bills would prohibit employers from using credit report information against prospective employees.

Currently in California, many employment law attorneys already recommend against using credit reports for every job applicant, and instead limit the use to positions that handle money, credit or private information.

At press time the committee had not established a quorum and had not voted on the bill.

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  1. larry 62
    larry 62 12 June, 2010, 07:11

    Another liberal attempt to excuse people from taking responsibility for their own lifestyles and poor financial decisions.

    Reply this comment
  2. Peyton Farquhar
    Peyton Farquhar 14 August, 2010, 00:37


    Yeah. Why can’t **everyone** be as mature, responsible & completely flawless as you are? BTW – how’s life in the ‘rents basement? Clearly, you don’t get out very often and aren’t exposed to ::REALITY:: on a regular basis if you believe your own propaganda. Step out into the real world sometime and talk to some real people. Ever hear of foreclosure? How about bankruptcy due to a catastrophic illness? How about loss of job through no fault of one’s own because of double digit unemployment in an ever increasingly crappy economy? Step down from the sanctimonious podium of self-righteousness. You may just learn a thing or two if you STFU long enough.

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