AB 22, a new law signed by Gov. Brown in early October that becomes effective January 1, 2012, will restrict the ability of most California employers from reviewing an applicant’s credit score and credit history unless there is a clear business justification for doing so. Under federal law, the Fair Credit Reporting Act (FCRA), pre-employment credit checks constitute a legitimate basis for pulling an individual’s credit information as part of a firm’s normal screening process. The federal rules require that the prospective employee provide advance written consent to the collection and review of the information. FCRA does not pre-empt states from enacting more protective rules, and California now joins six other states (Connecticut, Hawaii, Illinois, Maryland, Oregon, and Washington) that limit the use of credit checks in the employment context.

The California law will allow the use of credit checks in limited circumstances, typically when the individual will have fiduciary or managerial responsibilities; regular access to confidential, proprietary or certain personal information; or law enforcement. The full text of the bill, as signed by the Governor, is available here: http://leginfo.ca.gov/pub/11-12/bill/asm/ab_0001-0050/ab_22_bill_20110920_enrolled.pdf