California Background Checks

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California Background Checks

June 4, 2024

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Background checks are a vital part of thorough tenant screening. Every landlord needs to know the history of every applicant. Background checks give you a good idea of whether someone makes payment on time, stays out of massive debt, has a criminal past, and a lot more.

Background checks also reduce the chances of tenant turnover, protect you from liability, and help you and other tenants remain safe.

In this article, we’ll help you understand what background checks consist of, how to ensure you get the information you need, and what you need to know about your state’s rules regarding them.

What are Background Checks? 

Background checks typically consist of a credit report, criminal history, income verification, eviction history, and a rental application.

  1. Credit Report: Aside from a lease agreement, a tenant credit report might be the most crucial document for a landlord to understand. This document is one of the best ways to determine whether someone will pay on time and in full. Here are the main components of a credit report:
  • Basic information like former names/aliases, current and previous addresses, etc.
  • Fraud indicators like invalid phone numbers or phony social security numbers
  • Tradeline summaries that give a snapshot of an applicant’s active accounts
  • Inquiries that show a list of companies who viewed an applicant’s credit file over the last two years
  • Credit/resident score

The credit score and the resident score are key. A credit score is a numerical value anywhere from 300-850 that helps illuminate an applicant’s creditworthiness. If an applicant has a score of 500 or less, proceed with caution. Most reliable tenants will have a score above 560.

A resident score is similar to a credit score, but more directly reflects someone’s reliability as a tenant. Both scores are proprietary, so the exact formulas aren’t available to the public. That said, resident scores typically include a recommendation on whether to accept an applicant or not (this shouldn’t be treated as gospel obviously, but it’s helpful).

  1. Criminal History: Wide-sweeping national databases, more narrow specific state databases, and granular county records are the main elements of most criminal history reports.
  1. Income Verification: There are several ways to verify income. Let’s look at some of the most common methods here:
  • Pay Stubs: Paychecks are the most common way to verify income. Anyone with full-time or part-time employment can make copies of paychecks and send them to you.
  • Yearly Tax Returns: A federal tax return is another option to obtain proof of income. This is often an excellent option because it’s an official legal document, so it’s difficult to fake.
  • W-2 Tax Form: These forms show employer’s withholding payroll taxes from workers’ earnings. This is another good option because it’s a document directly from an employer.
  • Bank Statements: This method is especially effective for self-employed applicants because they won’t have regular pay stubs like those who work for traditional businesses.

Important Note: Innago’s new income verification feature, which you can learn more about here, makes it easier than ever to ensure your tenants have the necessary funds to pay you.

  1. Eviction History: Except in cases where overdue rent went to collections or a previous landlord reports late payments, credit reports don’t usually show evictions.

Federal law typically prevents evictions from being shown on a background check after seven years, but this figure varies by state.

If you cannot see an applicant’s eviction history on a credit report or obtain the information by contacting their previous landlords, then you may pull an eviction report. However, certain states have restrictions on different kinds of reports (we’ll address those if they’re relevant later in this piece).

Eviction history matters because the cost of an eviction for landlords is often between $4,000 and $7,000 or more. That means that if a tenant was evicted, they likely left their previous landlord with no other choice.

  1. Application: A rental application is a preliminary form used to obtain basic information about an applicant and their eligibility. Most applications ask for this information:
  • Basic Contact Information: Think entire legal name, cell phone number, email address, etc.
  • Current and Former Renting Experience: Four to five years back is typically plenty.
  • Landlord References: Contact previous landlords and get their take on applicants. This is a critical step that some landlords skip over. Make sure you’re not one of those landlords.
  • Employment History: You want to know current and former employers and get consent to contact them.
  • Written Permission to Run a Credit Check
  • Legal Disclosures: Here’s a helpful article on what disclosures to include.
  • Additional Inquiries: Be careful here. Make sure you don’t ask questions that violate laws. Only ask about things like pets or smoking. And make sure you’re consistent.

Why Do You Need to Run Background Checks? 

Background checks in general are utilized by a variety of groups: landlords, employers, lenders, licensing agencies, government agencies, etc. They are run to ensure that a candidate for a job, license, property, or loan is properly qualified and does not have a history of behavior that would interfere with their ability to perform the duties required under contract. Background checks minimize legal liability, protect companies’ assets and current employees, and are sometimes required by clients.

When it comes to landlords, background checks are needed to:

  • Protect the safety and property of other tenants
  • Reduce tenant turnover
  • Minimize legal liability
  • Increase the likelihood of on-time rental payments
  • Avoid conflict and crime in the rental community
  • Narrow down applicants for a high-demand property
  • Prevent expensive and lengthy eviction processes

California Background Checks 

Landlords in California state should run background checks on potential tenants as a precaution and general policy. Here are three reasons to run background checks in California:

  1. Identify rental application fraud

Rental application fraud, which occurs when a tenant lies on their application or submits falsified pay stubs, bank statements, etc., is on the rise across the country. The city of Los Angeles has a 10.8% rental application fraud rate, which is the sixth highest in the nation according to a recent Snappt study. Running credit checks in California can help you catch fraudulent documents and inconsistent information before the tenant moves into the property, meaning you won’t have to undergo an expensive eviction later.

  1. Avoid future evictions

Running a tenant’s eviction history in California can also help you avoid evictions for nonpayment or criminal activity. In August of 2023, the top 19 most populous counties in California filed over 11,230 evictions, a number which has grown tremendously since the expiration of pandemic eviction moratoriums. Eviction in California is a long and expensive process, taking anywhere from three weeks to two months. Because tenants with a previous eviction are more likely to be evicted again, running an eviction history is essential for avoiding turnover.

  1. Learn about the existence or nature of illegal activity

It’s also important to run criminal background checks in California. In 2019, California had the second largest criminal reentry population in the U.S. (behind only Texas) with over 987,400 releases from prisons and jails. Criminal background checks are important in identifying potential renters who are likely to violate the lease or the law. While landlords cannot have a blanket policy for denying convicts, certain crimes (like sex offenses) restrict convicts from certain housing options and are valid reasons to deny a tenant.

How Much Does a California Criminal Background Check Cost?

Background checks are relatively affordable across the U.S., but their costs vary depending on the area searched and the level of information requested. Searching national records typically costs between $13-60 per person, while searching an individual state’s records costs between $10 and $25 per person (criminal record information can be requested from the California Department of Justice). County records, which tend to be more accurate and up to date, cost $16-$25 per person per county checked. You can learn more about each type of background check report in our article on the topic.

What Are California Background Check Laws? 

California has more protections than the federal government does regarding how consumer information can be used. As a so-called “ban-the-box” state, California has several ban the box laws that restrict how criminal background reports and other information found in pre employment background checks can be used. The following fair employment, housing, and consumer information laws regulate the use of background checks in California.

Investigative Consumer Reporting Agency Act (ICRAA)

The Investigative Consumer Reporting Agency Act (ICRAA) (CA Civ. Code § 1786) was designed to ensure that consumer reporting agencies respect consumers’ rights to privacy, confidentiality, and fairness in California. It requires that information about consumers is accurate, relevant, and properly utilized. Note that the ICRAA is stricter than the Federal Credit Reporting Act (FCRA) and supersedes the FCRA anywhere where it is more restrictive than the federal law.

Below are the ICRAA’s primary restrictions for a criminal background check California considers complaint:

  • Background reports are limited to convictions that occurred within the last seven years, regardless of the salary of employees (the FCRA’s seven-year limitation does not apply when salaries exceed $75,000).
  • Charges or arrests that didn’t result in a conviction cannot be reported.
  • Sealed, dismissed, or expunged convictions cannot be reported.

Additionally, landlords and employers who use a California background check must notify applicants of the “nature and scope of the investigation requested” and then provide a summary of the rights provided by the law.

California Consumer Reporting Agencies Act (CCRAA)

This section of California law (CA Civ. Code § 1785 et al.) covers many aspects also included in the FCRA for protecting consumer information. Important regulations for users of consumer reports in this law include the following:

  • Employers must provide written notice before requesting a consumer credit report for employment purposes.
  • Job candidates can request a free copy of their credit report, which must be sent from the CRA to the employer and candidate simultaneously.
  • If a landlord/employer takes an adverse action based on consumer credit reports (e.g., denying a tenant for having too low of a credit score), they must provide written notice to the consumer explaining the basis for the action, the consumer’s rights, and the name of the credit reporting agency that was used.
  • Landlords cannot deny a housing applicant for having COVID-19 debt or use it as a negative factor in evaluating their application.
  • Credit reports and the information within them cannot be resold to other parties unless the user discloses the ultimate end user and their purpose of receiving the information to the credit reporting agency.

California Fair Chance Act (FCA)

The FCA (CA Civ. Code § 12952) is California’s “ban-the-box” law. This law limits when a California employment background check can be used and what kinds of information can be considered in employment decisions. According to this law, public employers in California with at least five employees cannot do any of the following:

  • Ask about a candidate’s criminal history record or require a criminal history background check until a conditional offer of acceptance has been given (i.e., the applicant must be determined to meet the employer’s other minimum requirements first).
  • Consider arrests that didn’t result in convictions (with a few exceptions)
  • Consider referral to or participation in pretrial or post trial diversion programs
  • Consider convictions that were sealed, dismissed, expunged, or statutorily eradicated, or one for which the person received a full pardon

California employers can still use criminal background checks and court records in the hiring process. However, they have to individually assess whether the applicant’s prior convictions have “a direct and adverse relationship with the specific duties of the job that justify denying the applicant the position.” This includes considering the “nature and gravity” of the offense, the “time that has passed” since the offense or sentence, and “the nature of the job held or sought.”

Adverse Actions: If an employer performs the assessment required by California’s Fair Chance Act and decides to deny the applicant, they need to notify the applicant of their decision in writing (this is sometimes called a pre-adverse action notice). The employer isn’t required to justify their preliminary decision in the notice, but they do need to include a copy of the report and state the disqualifying conviction from the applicant’s criminal record that was the primary reason for the denial. California applicants then get at least five business days to respond to this notice before the decision is finalized if they want to dispute the accuracy of the criminal history records. The employer must consider any new evidence the applicant provides before making their final decision and sending a final adverse action notice.

Note that the above individualized assessment must go into more detail than prescribed by the federal FCRA. Be sure you review the California Civil Code or speak to a California attorney if you have concerns about the use of criminal history information in your employee screening process.

San Francisco Fair Chance Ordinance (FCO)

San Francisco passed its own Fair Chance Ordinance in 2014 which applies to city businesses with at least five employees. This law prohibits employers and housing providers from considering:

  • Arrest or conviction records until after a conditional offer of employment
  • Arrests that did not lead to conviction (except for pending arrests)
  • Participation in a diversion or deferral of judgment program
  • Dismissed, expunged, invalidated, or inoperative convictions
  • Convictions in the juvenile justice system
  • Any offenses other than felonies or misdemeanors (e.g., infractions)
  • Convictions more than seven years old, unless the position supervises minors or dependent adults
  • Convictions for decriminalized conduct (e.g., the use or cultivation of cannabis)

Employers in San Francisco must also state in job ads that qualified applicants with criminal records will be considered as per the ordinance requirements. The Official FCO Notice must be posted conspicuously at work, and individuals must be given a chance to present evidence proving that their criminal information is inaccurate, rehabilitated, or that other mitigating factors are present.

Los Angeles Fair Chance initiative for Hiring Ordinance (FCIHO)

Los Angeles’s ban-the-box law (Assembly Bill No. 1008) applies to private employers and contractors in the city with 10 or more employees and went into effect in 2018. According to this law, employers are not allowed to ask about applicants’ criminal histories on job applications or postings and can only look at criminal reports after a conditional offer of employment has been made. Individual assessments are also required about the nature/gravity, job duties/responsibilities, time passed, and convictions. If this offer is withdrawn after the criminal report is viewed, the employer must follow the Fair Chance Process, which is similar to the procedures outlined in the FCA and FCO:

  1. Assess the responsibilities of the job and the applicant’s criminal history to see whether there are specific aspects of the criminal history linked to risks inherent to the job duties.
  1. Notify the applicant of the preliminary decision with written notice of the proposed adverse action.
  1. Hold the position for at least five business days.
  1. Allow the applicant to submit documentation with evidence of inaccuracies or mitigating circumstances/information.

Know the Law in California

Before you run a background check in California, be sure you’re aware of the state and federal laws that apply to their use. Keep in mind that while all California counties are subject to state-wide laws and executive orders, some counties may enforce additional regulations for background screening. Additionally, you must get written consent from a tenant before running a housing or pre employment background check. Be sure you’re educated on the law in your region and adhere to the HUD’s recommendations.

How Far Back Do Background Checks in California Go? 

When you use consumer reports to make tenant decisions, you must comply with the Fair Credit Reporting Act (FCRA).

Section § 605 – 15 U.S.C. § 1681c of The Fair Credit Reporting Act (FCRA) applies in all 50 states and mandates a seven-year restriction on reporting certain background check information like civil suits, civil judgments, and arrest records (except in certain cases where an employer is hiring for a job with a salary more than $75,000). The FCRA doesn’t have similar timeline restrictions on criminal convictions, but some states restrict reporting conviction information at the state or local level.

California is one of the states with more restrictions than the FCRA. In California, according to the ICRAA (see above), only convictions within the last seven years can be considered by landlords or employers (The FCRA caps non-conviction criminal information at seven years). This means users of consumer reports can only use the most recent criminal information (past seven years only) to make decisions about employment or housing, even if applicants have an older criminal conviction.

How to Run Background Checks in California 

To begin the California background check process, most people either conduct a DIY background check or use a third-party provider. If you run a DIY background check, your best bet is probably to request criminal history from the California Department of Justice, contact an applicant’s former landlords and employers, obtain a credit report, verify income, look at the sex offender registry, and ensure you have all the information you need to conduct thorough tenant screening. DIY checks can be risky, though, because it’s easier to run afoul or relevant laws and background check regulations inadvertently (unless you’re very well-versed in the law).

The better option for running a background check is to partner with a third-party provider, who often bundle credit, resident, criminal, and eviction histories together as a package. You can select the kind of reporting you need and let the third-party take care of the collection process.

Background Checks with Innago 

At Innago, we’ve partnered with TransUnion SmartMove to help you review California state background check information and identify high quality applicants. Running a background check through Innago allows you to quickly and easily identify the best applicants and ensure their application information is accurate. Likewise, Innago’s income verification feature helps our users verify reported income by connecting to their bank account, payroll provider, or by uploading documents.

This article is for educational purposes only and does not constitute legal advice. We recommend you consult with professional counsel if you have legal questions regarding your specific practices and compliance with relevant laws.

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