[Vendan]

If just with previous password, then yeah, that's fine, but more then likely they are saying with the previous N passwords, which would require storing the previous N passwords in some kind of plain text or easily reversible form. Even if those old passwords are useless at that point (which might not be the case for something like a laptop that hasn't talked to the domain controller and learned that the password has been updated or something), it's still dangerous (what if they used that password on a vendor's site, or on their own banking login...)