Adverse Action Requirements

July 10, 2018by accurateinvest

If you use consumer reports (sometimes called “credit reports”) to make credit decisions, you have legal obligations under the Fair Credit Reporting Act, known as the FCRA and the Risk-Based Pricing Rule. In particular: if you deny a consumer credit based on information in a consumer report, you must provide an “adverse action” notice to the consumer. When they receive these notices, consumers can contact the consumer reporting agency (“CRA”) that supplied the information to you to ensure their consumer report is accurate.

If you take adverse action against a consumer based on information in a consumer report, you must tell the consumer. When taking an adverse action (for example, not hiring an applicant or firing an employee) based on background information obtained through a company in the business of compiling background information, the FCRA has additional requirements:

Before you take an adverse employment action, you must give the applicant or employee:

a notice that includes a copy of the consumer report you relied on to make your decision; and

a copy of “A Summary of Your Rights Under the Fair Credit Reporting Act,” which you should have received from the company that sold you the report.

By giving the person the notice in advance, the person has an opportunity to review the report and explain any negative information.

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