New California Law Restricts Use of Credit Reports in Hiring

Gov Jerry Brown has signed a bill (AB 22) that prohibits employers from pulling credit reports on prospective employees, with exceptions. The exceptions include positions in management and in law enforcement, positions that require handling over $10,000 cash, and positions in which the employee will sign checks or transfer money for the employer.

According to the California Labor Federation 60% of employers routinely order credit reports on job applicants.

The proponents of the bill argued that a person’s credit score says nothing about his or her character or ability to do a job effectively and responsibly. Secondly, credit reports contain lots of inaccuracies and it is unfair to the applicant for employers to rely on the reports. Third, supporters contend that the use of credit reports for employment purposes disproportionately impacts female and minority workers who are typically concentrated in low-wage jobs.

A union official has aptly commented that job seekers with dings on their credit are put in a Catch-22 because they cannot pay their bills because they cannot get a job and they can’t get a job because they can’t pay their bills.


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