1. January 22, 2010 Background Checking: Conducting Credit Background Checks

2. Background Checking - Credit Checks| ©SHRM 2010 Introduction Overview of Credit Background Checks Many employers conduct some kind of background check on job applicants and/or employees. Background checks may include verification of educational or professional history, contacting references, obtaining a report on an individuals criminal history, and/or obtaining a report on an individuals credit history. The Fair Credit Reporting Act (FCRA) authorizes employers to obtain a consumer report foremployment purposes from a consumer reporting agency (CRA) so long as certain disclosure requirements are met. The term employment purposes, means a report that is used for the purpose of evaluating a consumer for employment, promotion, reassignment or retention as an employee. For some employers, credit payment records serve as a factor in evaluating an individuals suitability for a job, while others seek information on driving records, criminal histories, or other background information. All of these types of reports are considered consumer reports if they are obtained from a CRA. Before procuring a consumer report, FCRA requires employers to clearly disclose, in writing, that a report may be obtained for employment purposes and get written authorization from the individual. FCRA also requires that the employer provide the individual with a copy of the report and a written description of the consumers rights before taking any adverse action based in whole or in part on the report. The Federal Trade Commission website has additional information on the rights and duties imposed by the Fair Credit Reporting Act at (www.ftc.gov/os/statutes/fcradoc.pdf)www.ftc.gov/os/statutes/fcradoc.pdf 2

3. Background Checking - Credit Checks| ©SHRM 2010 Does your organization, or an agency hired by your organization, conduct credit background checks for any job candidates by reviewing the candidates consumer reports? 3 Note: n = 343

4. Background Checking - Credit Checks| ©SHRM 2010 When conducting credit background checks on job candidates, in general, how many years of credit history does your organization check by job level? 1 year 2–3 years 4–5 years 6–7 years 8–9 years 10 years or more Executive/upper management (e.g., CEO, CFO)0% 16%50%11%23% Other management (e.g., directors, managers)0% 18%55%11%16% Nonmanagement, salaried employees0%2%16%56%12%14% Nonmanagement, hourly employees0%2%17%55%12%14% 4 Note: n = 45. The data in this table represent organizations that conduct credit background checks on all job candidates. Respondents were asked to round up to the highest year.

5. Background Checking - Credit Checks| ©SHRM 2010 On which categories of job candidates does your organization conduct credit background checks? 5 Note: n = 158.The data in this figure represent organizations that conduct credit background checks on select job candidates. Percentages do not total to 100% as respondents were allowed multiple choices.

6. Background Checking - Credit Checks| ©SHRM 2010 When conducting credit background checks on job candidates, in general, how many years of credit history does your organization check? 1 year 2–3 years 4–5 years 6–7 years 8–9 years 10 years or more Job candidates who will work with children, the elderly, the disabled and other vulnerable populations 0% 100%0% Job candidates who will have security responsibilities (e.g., security guards, etc.) 7% 0%79%0%7% Job candidates for positions involving national defense or homeland security 0% 9%64%0%27% Job candidates who will have access to highly confidential employee information (e.g., salary, benefits, medical information or other personal information about employees, etc.) 2%12% 61%2%12% Job candidates for positions with fiduciary and financial responsibility (e.g., handling cash, banking, accounting, compliance, technology, etc.) 1%6%16%61%1%16% Job candidates for senior executive positions (e.g., CEO, CFO, CHRO, etc.) 0%3%9%61%1%26% Job candidates who will have access to company or other people's property or otherwise placed in a position of financial trust (e.g., information technology, administrative services, cleaning crews, etc.) 0%14% 59%0%14% Job candidates who will be employed in safety-sensitive positions (including operating heavy equipment, transportation, etc.) 0%13%0%50%0%38% Job candidates who will work in health care or with access to drugs (e.g., hospitals, nursing homes, clinics, pharmacies, rehabilitation centers, etc.) 0%25%0%50%0%25% Job candidates for positions for which applicable state law requires a background check (e.g., day care teachers, licensed medical practitioners, etc.) 0% 50%0%50% 6 Note: n = 4-138. The data in this table represent organizations that conduct credit background checks on select job candidates. Data sorted by the 6–7 years column. Respondents were asked to round up to the highest year.

7. Background Checking - Credit Checks| ©SHRM 2010 In general, if a credit background check revealed information that presented the job candidates financial situation negatively, what types of information are MOST likely to affect your decision to NOT extend a job offer? 7 Note: n = 201. Percentages do not total to 100% as respondents were allowed multiple choices. Respondents were asked to select their top two options.

8. Background Checking - Credit Checks| ©SHRM 2010 When does your organization, or any agency hired by your organization, initiate credit background checks on job candidates? 8 Note: n = 199

9. Background Checking - Credit Checks| ©SHRM 2010 Does your organization allow job candidates, in certain circumstances, the opportunity to explain the results (e.g., high debt, bankruptcy, etc.) of their consumer report that might have an adverse effect on an employment decision? 9 Note: n = 197

10. Background Checking - Credit Checks| ©SHRM 2010 What is the primary reason that your organization conducts credit background checks on job candidates? 10 Note: n = 195

11. Background Checking - Credit Checks| ©SHRM 2010 Demographics: Organization Industry Industry Health care, social assistance (e.g., nursing homes, EAP providers)18% Servicesprofessional, scientific, technical, legal, engineering12% Manufacturingother11% Educational services/education8% Government/public administrationfederal, state/local, tribal5% Financial services (e.g., banking)5% Transportation, warehousing (e.g., distribution)5% Insurance5% Retail/wholesale trade4% Construction, mining, oil and gas3% Other services (e.g., nonprofit, church/religious organizations)3% High-tech3% 11 Note: n=312. Percentages may not total 100% due to rounding.

12. Background Checking - Credit Checks| ©SHRM 2010 Demographics: Organization Industry (continued) Industry Telecommunications3% Utilities3% Servicesaccommodation, food and drinking places2% Publishing, broadcasting, other media2% Arts, entertainment, recreation2% Consulting1% Manufacturingauto/auto-related1% Real estate, rental, leasing1% Associationprofessional/trade1% Pharmaceutical1% Other1% 12 Note: n=312. Percentages may not total 100% due to rounding.

13. Background Checking - Credit Checks| ©SHRM 2010 Demographics: Organization Sector 13 Note: n = 319. Percentages may not total 100% due to rounding

14. Background Checking - Credit Checks| ©SHRM 2010 Demographics: Organization Staff Size 14 Note: n = 312. Percentages may not total 100% due to rounding

15. Background Checking - Credit Checks| ©SHRM 2010 Demographics: Organization Region 15 Note: n = 312. Percentages may not total 100% due to rounding

16. Background Checking - Credit Checks| ©SHRM 2010 Demographics: Organization Operations Location 16 Note: n = 315 Percentages may not total 100% due to rounding

17. Background Checking - Credit Checks| ©SHRM 2010 Background Checking: Conducting Credit Background Checks Response rate = 19% Sample comprised of 433 randomly selected HR professionals from SHRMs membership Margin of error is +/- 5 Survey fielded November 18 – December 4, 2009 17 Methodology