“Credit Checks” in California? There’s (Another) Disclosure for That!

Last month we discussed California’s Investigative Consumer Reporting Agencies Act (“ICRAA”) and the state-specific disclosures required by the ICRAA if you obtain “investigative consumer reports” as defined by California law on applicants or employees who live or work in California (available here).

However, the California-specific requirements don’t end with the ICRAA.

If you obtain background reports on your applicants or employees who have a mailing address in California bearing on their creditworthiness, credit standing, or credit capacity (known as “consumer credit reports” in California), you may have additional disclosure requirements as outlined in the California Consumer Credit Reporting Agencies Act (“CCRA”).

Before requesting your report, you must:

• Provide written notice to the applicant or employee that a “consumer credit report” will be used for employment purposes.
• Identify in the notice the specific basis for the use of the report.
  • Insider Tip: California law strictly limits the particular grounds for the use of a “consumer credit report,” only allowing an employer to use it for very specific positions, as detailed in California Labor Code § 1024.5. Even if you may have a “permissible purpose”, as those terms are defined by the Fair Credit Reporting Act (“FCRA”) or even the ICRAA, it may not be valid for a “consumer credit report” under the CCRA.  Double-check that you have a specific basis for using a consumer credit report under the CCRA before ordering background reports on your California applicants and employees that bear on their creditworthiness, credit standing, or credit capacity!
• Identify in the notice the source of the report.
• Provide your applicant or employee with a box in the notice that they can check off to receive a copy of the report.
  • Insider Tip: If your applicant or employee checks this box, be sure to let your background check partner know so they can provide your applicant or employee with a copy of their report. Note – Verified Credentials’ clients don’t need to notify us if their notice is in their Candidate Verification Center. We will automatically send the applicant or employee a copy of the report if the box is checked.

For a sample CCRA notice to review in creating your own, take a look at the “California Consumer Credit Report Disclosure” in Verified Credentials’ Resource Library.

Laws surrounding background reports can be complex, especially in California!  If you have applicants or employees that have mailing addresses in California, and you are thinking about obtaining background reports on them, you may want to check with your legal advisor to make sure that your disclosures comply with California law.