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California Employers Should Ensure Compliance With Recent Amendments When Obtaining Consumer Reports

  • January 31, 2002

Employers obtaining consumer credit reports on applicants or employees in California should review their procedures and forms in light of recent amendments to that state's fair credit reporting law, which became effective on January 1, 2002. To obtain or conduct an "investigative consumer report," California employers must disclose to the applicant or employee, within three days of requesting the information, the name and address of the reporting agency, the nature and scope of the investigation, and a summary of the consumer's rights to inspect the reporting agency's files. Employers also must provide a copy of the report to the applicant or employee at the time of the initial meeting or interview, or within seven days of the report's receipt, whichever is earlier.

Under California law, the definition of "investigative consumer report" broadly covers information on "character, general reputation, personal characteristics, or mode of living" obtained by any means (not just personal interviews, as specified in the similar federal law, the Fair Credit Reporting Act). As a result, the disclosure requirements apply to almost every request for background information on a "consumer," meaning employee or job applicant. Under certain circumstances, these requirements do not apply, such as when the requested report is limited to specific factual information relating to a consumer's credit record, or when such credit information is obtained directly from a creditor or a consumer reporting agency.

California law also imposes disclosure requirements on any person who acts on his or her own to obtain background information. In other words, an employer which, in lieu of using the services of an investigative consumer reporting agency, "collects, assembles, evaluates, compiles, reports, transmits, transfers or communicates" information on a consumer's character, general reputation, personal characteristics or mode of living for employment or other specified purpose, must comply with the law's disclosure requirements. Specifically, the law provides that the information shall be provided to the consumer at the time of the meeting or interview or within seven days of the date the employer obtains the information, whichever is earlier. Penalties for noncompliance with any of the investigative consumer report requirements are severe, including a minimum award of $10,000 or the individual's actual damages, whichever is greater, attorneys' fees and costs, and punitive damages.

The amendments are contained in Assembly Bill 655, pertaining the pertinent sections of Title 1.6A of Part 4 of Division 3 of the Civil Code relating to personal identifying information.

Given the complexities and the potential liability for failure to comply with the fair credit reporting requirements, Jackson Lewis has prepared a compliance guide addressing the investigative consumer report and consumer credit report requirements for California employers, including sample forms.

©2002 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

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