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Adverse Action Notice Under the FCRA

On Behalf of | Feb 7, 2014 | Consumer Protection

Under the Fair Credit Reporting Act (“FCRA”), consumers applying for credit are required to receive notice after being denied.

What is an adverse action notice?

This notice is to include the reasons adverse action was taken against the consumer as well as the name of the credit reporting agency used to make this decision and a summary of the consumer’s rights under the FCRA.

The reasons for adverse action requirements under the FCRA are to notify consumers that negative information exists on their credit report and that this information was the basis for the adverse action.

Under the FCRA, consumers have 60 days from the date the notice was received to obtain a free copy of their credit file and to ascertain the nature of the negative information, i.e. is the information accurate.

What is an adverse action?

To ensure compliance with the FCRA it is important to understand the definition of adverse under the FCRA.  The FCRA defines adverse action as,

  • A denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of insurance;
  • A denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee;
  • A denial or cancellation of, an increase in any charge for, or any adverse or unfavorable change in the terms of a government license or benefit; or
  • An action on an application or transaction initiated by a consumer, or in connection with account review that is adverse to the consumer’s interests.

What must be included in an adverse action notice?

The adverse action notice must be based in whole or in part on information contained in a consumer report.

Additionally, the adverse action notice must advise consumers of their rights, including:

  • The right to obtain a free copy of their credit report from the agency that provided the information if requested within 60 days
  • The right to dispute any inaccurate or incomplete information
  • The right to request the name, address, and phone number of the credit reporting agency that furnished the report

The notice must also contain a statement that the credit reporting agency did not make the decision and is unable to provide the consumer with specific reasons as to why the adverse action was taken.

Contact us for a free case review

If you believe you have not received adverse action in compliance with the FCRA after submitting an application for credit or employment and would like to discuss your situation in more detail with a licensed attorney, contact SmithMarco P.C. for a free case review or call us at (888) 822-1777.