California Court of Appeal Holds that ICRAA is Not Unconstitutionally Vague

 Gavel

Written By ESR News Blog Editor Thomas Ahearn

A California Court of Appeal has held that the Investigative Consumer Reporting Agencies Act (ICRAA) governing “investigative consumer reports” containing information on a consumer’s character is “not unconstitutionally vague.”

The ICRAA is the California state version of the federal Fair Credit Reporting Act (FCRA). Enacted in 1970, the FCRA (15 USC § 1681 et seq) regulates the collection, dissemination, and use of consumer information for background checks nationwide.

A number of states have their own rules for background checks that must be followed in addition to the FCRA. The California law is notable for having a large number of “only in California” requirements in addition to national rules required by the FCRA.

The California rules also provide for a $10,000 potential civil penalty for a violation of the California ICRAA, so the issue of whether the ICRAA applies to background checks is critical for employers using them for employment purposes.

Both the ICRAA and the Consumer Credit Reporting Agencies Act (CCRAA) regulate agencies that gather information on consumers to provide to employers, landlords, and others for use in making employment, rental, and other decisions.

The ICRAA (Civ. Code,1 § 1786 et seq.) governs agencies with regard to “investigative consumer reports” that contain information on a consumer’s character, general reputation, personal characteristics, or mode of living.

The CCRAA (§ 1785.1 et seq.) governs agencies with regard to “consumer credit reports” that contain information bearing on a consumer’s credit worthiness, credit standing, or credit capacity.

In Connor v. First Student, Inc., the Plaintiff’s lawsuit alleging violations of the ICRAA was dismissed after the trial court granted Defendant’s motion for summary judgment based on the holding of Ortiz v. Lyon Management Group, Inc. (2007).

The Plaintiff’s appeal involved investigative consumer reports ruled by the ICRAA made on employees of the defendants. However, the California Court of Appeal, Second Appellate District, Division Four, disagreed with analysis from Ortiz.

In the Ortiz case, an appellate court held that the ICRAA was “unconstitutionally vague” as applied to tenant screening reports containing unlawful information because that information related “to both creditworthiness and character.”

In that court’s view, the ICRAA and the CCRAA required information in consumer reports to be categorized as either character information governed by the ICRAA or creditworthiness information governed by the CCRAA.

As a result, when such information can be categorized as character information and creditworthiness information, the “statutory scheme” could not be constitutionally enforced without adequate notice of which act governs that information.

However, in disagreeing with the analysis in Ortiz, this Court of Appeal held that: “There is nothing in either the ICRAA or the CCRAA that precludes application of both acts to information that relates to both character and creditworthiness.”

This Court of Appeal concluded the ICRAA “is not unconstitutionally vague as applied to such information” and reversed the summary judgment. The Opinion is available at http://www.esrcheck.com/file/CONNOR-v-FIRST-STUDENT.pdf.

Until this matter is firmly decided by the courts – and potentially the California legislature – employers and background screening firms generally should continue to operate under the current California state rules for background checks.

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