What Is an Adverse Action Notice?

Author Gertrude Brogi

Posted Apr 15, 2023

Reads 7.2K

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If you've ever applied for a loan or credit card and been denied, you may have received an adverse action notice from the creditor. An adverse action notice is a legal document that creditors send to individuals who are denied credit explaining why they were denied and what they can do next.

The purpose of an adverse action notice is to inform the consumer of their rights and provide them with information on how to dispute the decision. The notice must be sent within a certain timeframe after the denial, depending on the type of credit being applied for.

It's important to understand that receiving an adverse action notice does not necessarily mean that you have poor credit. Often, the reason for denial may be due to incorrect information on your application or a high debt-to-income ratio. In this article, we'll dive deeper into what an adverse action notice is, what it contains, and what you can do if you receive one.

Definition and Example of an Adverse Action Notice

An adverse action notice is a written or electronic disclosure that informs an applicant of a negative credit-related action. This could be due to reasons like being denied a credit card, not receiving the credit limit they requested or having their application rejected altogether. If an applicant has applied for a credit-based application either online or in person, the credit card company is required by law to provide them with an adverse action notice if they decide not to extend credit.

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For instance, let's say you apply for a credit card online and your application is declined by the credit card company. In this case, the company must send you an adverse action notice, stating the reason behind their decision. The notice will include information such as your current credit score, any negative remarks on your credit report and other details that may have influenced their decision. These notices are designed to help individuals understand why they were denied credit and how they can improve their chances of getting approved in the future.

Sample Landlord Adverse Action Notice

Adverse action notices are important documents that landlords must send out to tenants who have been denied housing or had their lease terminated. These notices inform the tenant of the reason for the adverse action and provide them with information about their rights under federal law. Landlords are required to send out an adverse action notice within a certain time due to the information obtained from a consumer reporting agency report.

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The adverse action notice must include specific information about the tenant's consumer report, including the name of the consumer reporting agency that provided it, and how to contact them. Landlords must also provide tenants with a copy of their consumer report and inform them of their right to dispute any inaccuracies in it. If a landlord fails to send out an adverse action notice within sixty (60) days, they could face legal consequences.

In summary, an adverse action notice is a critical document that protects tenants' rights and informs them of why they were denied housing or had their lease terminated. It is essential for landlords to follow federal law by sending out these notices within sixty (60) days of obtaining information from a consumer reporting agency report. Failure to comply with these requirements could lead to legal trouble for landlords, so it is best to take this process seriously and ensure that everything is handled correctly.

Efficient Ways to Get Rid of Documents You No Longer Need

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When it comes to adverse action notices, companies make sure to follow the legal requirements set out, which means holding onto records obtained for at least 60 days after sending out the notice. However, once that time has passed, there are efficient ways to get rid of documents you no longer need. This can include shredding paper copies or permanently deleting electronic files. It's important to ensure that any information that could identify the affected person is properly disposed of so as not to compromise their privacy.

Find Out Who Must Deliver an Adverse Action Notice

Federal law requires that anyone who takes adverse action against a person receiving credit or employment must provide them with an adverse action notice. Adverse action notices are crucial documents that inform the person of the reasons for the adverse decision and give them an opportunity to correct any errors in their record.

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Notices failing to provide this information can result in severe consequences for applicants, including being denied credit or employment opportunities. Therefore, it is essential that entities receiving adverse action notices make clear why the decision was made and what steps the person can take to address any issues. The notice specifies whether the applicant applied for contracting, employment, or credit, and also includes contact information for the Equal Employment Opportunity Commission (EEOC) if they feel they have been discriminated against. Obtaining credit reports is another instance where an adverse action notice must be provided to ensure transparency in decision-making processes.

Adverse Action Notice Exceptions

Adverse action notices defines instances in which an employer, landlord, or banker may deny credit or take negative action against a consumer. There are several exceptions to when an adverse action notice must be provided, including accounts inactivity delinquency and credit made to extend credit that is legally prohibited. It's important for consumers to understand their rights when it comes to adverse action notices and how they may impact their financial standing.

Discover how an Adverse Action Notice can affect you

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An adverse action notice is an important document that can have a significant impact on your financial standing. It's typically sent by a creditor or lender after reviewing your credit report, which is compiled by one of the three major consumer reporting agencies: Equifax, Experian, and TransUnion. If you're denied credit, employment, insurance, or housing due to information in your credit report, you have the right to receive an adverse action notice explaining the reason for the denial and providing information about how to obtain a free copy of your credit report from the credit bureau used by the creditor.

Adverse Action Notice for Other Reasons

If you've recently received an adverse action notice from a credit card or loan application denied, it's important to understand what it means. Essentially, an adverse action notice is a written letter that informs you of the reasons why your credit decision was denied. The letter will typically include your credit score and score ranges, as well as contact information for the credit bureau that provided your credit report. If you want to review your credit report for free, simply follow the instructions listed on the adverse action notice and make a written request within 60 days of receiving the notice. A valid clear copy of your credit report will be sent to you by the credit bureau.

Discover the Purpose of a Consumer Report

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A consumer report is a profile generated by a reporting agency that contains information about an individual's creditworthiness, character, employers, landlords, and more. This report is used by businesses to determine whether or not to extend credit or offer employment to an individual depending on the requested details. Adverse action notices are sent to individuals when they are denied credit or employment due to information found in their consumer report. These reports may contain public records and can be obtained for a small fee. Understanding the purpose of a consumer report is important for anyone seeking credit or employment opportunities.


An adverse action notice is a written or oral communication that informs consumers of their eligibility for credit, employment, or other purposes authorized under section 1681b of the source 15. This notice is required by law and must be provided by anyone who takes adverse action against a consumer based on information in a consumer report. A term consumer report means any communication from a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used for personal, family, household purposes or employment purposes.

Frequently Asked Questions

Do we have to give an adverse action notice?

Yes, if you are denying credit or employment based on information from a consumer report, you must provide an adverse action notice that includes the name and contact information of the consumer reporting agency.

What should I look for when reviewing my adverse action notices?

When reviewing adverse action notices, look for the reason for the action, any errors or inaccuracies in the notice, and your rights to dispute the decision.

What are the steps I need to take to comply with FCRA standards when sending an adverse action notice?

To comply with FCRA standards when sending an adverse action notice, you need to provide specific information about the decision to deny credit or employment and include a copy of the consumer report used in the decision. Additionally, give the consumer contact information for the company that provided the report and inform them of their right to dispute any inaccurate information.

When you must issue an adverse action notice?

You must issue an adverse action notice when you deny credit, employment, insurance, or other benefits based on information obtained from a consumer report.

What is adverse action and when is it required?

Adverse action is the legal term used to describe a negative decision, such as denying someone a loan or firing an employee. It is required when that decision is based on specific criteria, including credit history or job performance, and must be communicated in writing to the affected party.

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Gertrude Brogi

Writer at CGAA

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Gertrude Brogi is an experienced article author with over 10 years of writing experience. She has a knack for crafting captivating and thought-provoking pieces that leave readers enthralled. Gertrude is passionate about her work and always strives to offer unique perspectives on common topics.

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