Adverse action and how to handle a decline
Your general responsibilities under the Fair Credit Reporting Act when you decline an applicant based on a report.
If you decline an applicant, or take another adverse action, based in whole or in part on information in a screening report, you may have obligations under the Fair Credit Reporting Act. This article is a general overview and is not legal advice. Consult your own counsel for your specific situation.
What adverse action means
Adverse action includes denying an application, requiring a co-signer, requiring a higher deposit, or other less favorable terms, when the decision is based on a consumer report.
General responsibilities
When you take adverse action based on a report, the Fair Credit Reporting Act generally requires that you provide the applicant with an adverse action notice. This notice typically informs the applicant of the decision, identifies the consumer reporting source, and explains the applicant right to dispute the information and to request a copy of the report.
Why this matters
Following the adverse action process protects applicants and reduces your compliance risk. Because requirements vary by jurisdiction and circumstance, confirm your obligations with qualified counsel.
For how applicants can review their own information, see Your rights regarding your report.