Effective January 1, 2012, California employers will have to avoid yet another potential legal hazard that haunts businesses with the threat of costly penalties: the unauthorized use of consumer credit reports regarding job applicants and current employees.

Currently, pursuant to the California Consumer Credit Reporting Agencies Act, employers can request a consumer credit report (i.e., a report obtained from a consumer credit-reporting agency bearing on an individual's credit worthiness, credit standing, or credit capacity) for purposes of evaluating an applicant or employee for employment, reassignment, or retention. But starting next year a valid reason for obtaining a consumer credit report should be viewed as being the exception rather than the rule.

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