California Limits the Use of Credit Reports for Employment Screening

In early October 2011, California’s Governor Brown, signed California Assembly Bill Number 22 (AB 22) which limits most employers from obtaining consumer credit reports for employment purposes.  The exceptions are certain financial institutions, law enforcement positions, and those having access to proprietary information or large amounts of money.

If a credit check is conducted, the candidate has to be informed of this and can request a free copy of the report. If they are declined employment, because of their credit, they are to be informed of the reason.

Bill Exceptions

An employer or prospective employer shall not use a consumer credit report for employment purposes unless the following criteria are satisfied:

  1. It is a managerial position.
  2. It is a position in the state Department of Justice.
  3. It is a sworn peace officer or other law enforcement position.
  4. A position for which the information contained in the report is required by law to be disclosed or obtained.
  5. A position that involves regular access, for any purpose other than the routine solicitation and processing of credit card applications in a retail establishment, to bank or credit card account information, Social security number or  date of birth.
  6. A position in which the person is a named signatory on the bank or credit card account of the employer, authorized to transfer money on behalf of the employer, or authorized to enter into financial contracts on behalf of the employer.
  7. A position that involves access to confidential or proprietary information, including a formula, pattern, compilation, program, device, method, technique, process or trade secret.
  8. A position that involves regular access to cash totaling ten thousand dollars ($10,000) or more of the employer, a customer, or client, during the workday.

California is not the first

The six other states that have passed similar legislation include Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington. These states have taken this action, because many of the unemployed have been subject to hard economic times, which are reflected in their credit reports. They shouldn’t be penalized because they have been unemployed for a long time and can’t pay their bills.  They will never get caught up, if they can’t be employed, because of their poor credit history.

And, many believe a credit history is not a reflection of future job performance.  “A credit report is not a good indicator of a person’s trustworthiness or work ethic,” says Assembly Member Mendoza, author of the bill. “Many Californians are still experiencing financial hardships from the economic downturn including layoffs, increasing unemployment rates, and the continuing foreclosure crisis. All of these things make it harder for people to pay their bills.”

Credit Expert, John Ulzheimer, is the President of Consumer Education at, the credit blogger for, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.


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