Adverse Action Notices: What to Send When You Deny an Applicant
June 2, 2024If you deny an applicant — or offer them different terms, like a higher deposit — based even partly on information in a credit or background report, the Fair Credit Reporting Act (FCRA) requires you to send an adverse action notice. This applies whether you pulled the report yourself or a screening company did it for you.
What an adverse action notice must include
At minimum, the notice must disclose:
- • The decision (denial, or different terms) and that it was based in whole or in part on a consumer report
- • The name, address, and phone number of the screening company that provided the report
- • A statement that the screening company didn't make the decision and can't explain the reason for it
- • The applicant's right to a free copy of the report from the screening company within 60 days
- • The applicant's right to dispute the accuracy of the report with the screening company
When it applies
The notice requirement is triggered any time a credit or background report played any role in the decision — not just when it was the sole reason. If you denied someone for insufficient income and a low credit score both contributed, an adverse action notice is still required.
Timing and delivery
Send the notice as soon as the decision is made — there's no fixed grace period under FCRA, so prompt notice is the safest practice. Email is generally acceptable if the applicant applied electronically and consented to electronic communication.
Frequently Asked Questions
Do I need to send an adverse action notice if I deny someone for a reason unrelated to their report?
If the report played no role at all in the decision, FCRA's adverse action notice isn't triggered — but if the report was a factor even alongside other reasons, it is.
What happens if I don't send an adverse action notice?
FCRA violations can carry statutory damages, and applicants (or regulators) can bring claims for noncompliance — it's a low-effort, low-cost step that's worth doing consistently rather than risking exposure.
Does the adverse action notice need to explain why I denied the applicant?
No — you're not required to explain your specific reasoning, only to disclose that a report was used, identify the screening company, and inform the applicant of their rights regarding that report.