California Bans Most Credit Checks for Employment Purposes

November 02, 2011 /24-7PressRelease/ -- California Gov. Jerry Brown signed an important employment law into effect in early October. The bill prohibits most employers from using credit scores and credit history in making hiring decisions. California is the seventh state in the country to ban the practice of credit checks by most employers. Another 20 states are considering such measures.

Based on a survey by the Society of Human Resource Management, about 60 percent of companies throughout the U.S. use credit history as a factor in the hiring process. This number has steadily risen in the past decade, from only 19 percent in 1996 and 35 percent in 2003.

The new law makes it illegal for most businesses to rely on credit checks. The California law, however, does not prohibit credit checks in all hiring circumstances. The legal issue will fall on whether the credit check is a necessity for the position. Read more