SENATE Amended 3rd Reading February 21, 2012 SENATE Amended 2nd Reading February 20, 2012Second Regular Session Sixty-eighth General Assembly STATE OF COLORADO REENGROSSED This Version Includes All Amendments Adopted in the House of Introduction LLS NO. 12-0302.02 Kate Meyer x4348 SENATE BILL 12-003 SENATE SPONSORSHIP Carroll, HOUSE SPONSORSHIP Fischer, Senate Committees House Committees Judiciary A BILL FOR AN ACT Concerning the use of consumer credit information by employers. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at http://www.leg.state.co.us/billsummaries.) The bill creates the "Employment Opportunity Act", which specifies the purposes for which consumer credit information (i.e., consumer credit reports and credit scores) can be used by an employer or potential employer (jointly referred to as "employer"). Specifically, the bill: Prohibits an employer's use of consumer credit information for employment purposes if the information is unrelated to the job; Requires an employer to disclose to an employee or applicant for employment (jointly, "employee") when the employer uses the employee's consumer credit information to take adverse action against him or her and the particular credit information upon which the employer relied; Authorizes an employee aggrieved by a violation of the above provisions to bring suit for an injunction, damages, or both; and Requires the department of labor and employment to enforce the laws related to employer use of consumer credit information. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Legislative declaration. (1) The general assembly hereby finds and declares that: (a) Consumer credit scores and credit reports often exclude relevant information or include inaccurate information, and some research, including a 2011 study conducted by the Policy and Economic Research Council, suggests that more than twenty million Americans have material errors on their credit reports; (b) There is also evidence, according to researchers at the Center for Economic Justice and the National Consumer Law Center, that racial and ethnic disparities exist in, and are perpetuated by, consumer credit scoring and credit reporting; (c) In spite of these systemic flaws, the nonpartisan public policy research and advocacy organization Demos concluded in its 2011 report "Discrediting America" that consumer credit scores and credit reports are being used more often and in more contexts than ever before, including by employers, utility companies, and insurers; (d) Despite a lack of evidence showing that consumer credit history correlates to an individual's job performance or likelihood to commit fraud, the number of employers relying on consumer credit information to evaluate employees or potential employees has increased dramatically, with sixty percent of employers using consumer credit information to evaluate job candidates; (e) Currently, job-seekers may have no way of knowing whether or not their credit scores are being used as a factor in considering their applications for employment; and (f) People who have lost their jobs are more likely to have lower credit scores and yet, as a result of employers' use of credit information to make employment decisions, people with lower credit scores are less likely to become re-employed. The impact of this practice has been to create chronic barriers to employment for otherwise qualified people who may have a reduced credit score as a result of one or more layoffs in the family, being a single parent, a medical emergency, a divorce, or a death in the family. (2) The general assembly, therefore, intends to remove unnecessary barriers to employment and to mitigate some of the inequality that inheres in consumer credit information by ensuring that credit scoring is not used in making employment decisions unless it is legitimately related to the job. SECTION 2. In Colorado Revised Statutes, add 8-2-126 as follows: 8-2-126. Employer use of consumer credit information - violation - short title - definitions. (1) This section shall be known and may be cited as the "Employment Opportunity Act". (2) As used in this section: (a) "Adverse action" means: (I) For an applicant for employment, denial of employment; and (II) For an employee, demotion, reassignment to a lower-ranked position or to a position with a lower level of compensation, decrease in compensation level, denial of promotion, or termination of employment; or (III) Any other decision for employment purposes that adversely affects an employee or applicant. (b) "Consumer credit information" means a written, oral, or other communication of information bearing on a consumer's creditworthiness, credit standing, credit capacity, or credit history. "Consumer credit information" includes a credit score. (c) "Credit score" means an attempted numerical quantification of a person's creditworthiness or credit history. (d) "Employee" has the meaning set forth in section 8-1-101. (e) "Employer" has the meaning set forth in section 8-1-101. (f) "Employment purposes" means evaluating a person for employment, hiring, promotion, demotion, reassignment, adjustment in compensation level, or retention as an employee. (3) (a) An employer shall not use consumer credit information for employment purposes unless the information is required by a defense or security contract, including contracts with the federal department of defense. (b) When consumer credit information is sought to be used in accordance with this section, an employer may inquire further of the employee or applicant for employment to give him or her the opportunity to explain any unusual or mitigating circumstances where a credit score may not reflect money management skills but is rather attributable to some other factor, such as a layoff, an error in the credit information, a medical expense, a divorce, or a death in the person's family. (4) If an employer relies, in whole or in part, on consumer credit information to take adverse action regarding the employee or applicant for employment whose information was obtained, the employer must disclose that fact, and the particular information upon which the employer relies, to the employee or applicant. The employer shall make the disclosure required under this subsection (4) to an employee in writing or to an applicant using the same medium in which the application was made. (5) A person who is injured by a violation of this section may bring a civil action in a court of competent jurisdiction to obtain injunctive relief or damages, or both. The court shall award reasonable costs and attorney fees to a prevailing party in an action brought under this subsection (5). (6) It is the duty of the director of the division of labor in the department of labor and employment to enforce this section. SECTION 3. Effective date - applicability. This act takes effect July 1, 2012, and applies to acts occurring on or after said date. SECTION 4. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.