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Adverse Action

The term "adverse action" is defined by Section 603 of the Fair Credit Reporting Act, as amended, as generally including any and all negative actions which affect consumers. Essentially, any unfavorable change in credit or contract terms, denial or cancellation of credit or insurance, or denial of employment would all be included. See a portion of Section 603 reproduced here for illustration purposes only.

Coverage of Adverse Action May Not Require Consumer Report

A caution is in order any time that adverse action is taken. Even those who are not "users" of consumer reports may be required by Federal law to give notices. The Fair Credit Reporting Act, as amended, requires that notice be given to the consumer under the following situations:

1.When adverse action is taken based, at least in part, upon a consumer report

2. When adverse action is taken based, at least in part, upon information obtained from third parties who are not consumer reporting agencies

3. When adverse action is based, upon information obtained from an affiliated entity.

In addition to the requirements of this section, the same facts may require action under the Equal Credit Opportunity Act, or state law provisions. Special rules apply to consumer reports for "employment purposes" and investigative consumer reports. See the portion of the FTC Prescribed Notice To Users reproduced here for illustration purposes.

If any adverse action is taken, based in whole or in part on any information in a consumer report, oral, written or electronic notice of the adverse action, and the name address and phone number of the credit reporting agency shall be given to the consumer. In addition, the user must advise the consumer that the agency did not make the adverse decision, and is unable to provide the reasons for the action. A toll-free number is required for agencies operating on a nationwide basis.

The consumer must further be notified orally, in writing, or electronically, of their right under Section 612 to obtain a free credit report for 60 days, and of their right to dispute the accuracy or completeness of any information, under Section 611. Section 615 of the Fair credit Reporting Act, as amended, is reproduced for illustration purposes only. Click here or on "Show More Detail" below.

A copy of The Fair Credit Reporting Act, As Amended, and a copy of the FTC Official Staff Commentary to the Fair Credit Reporting Act are included under "Fair Credit Reporting Resources", available from LAWDOG Credit Reporting Center, or here. Use browser return button to return. Read Notices, Caution and Disclaimer. A copy the FTC Prescribed Notice to Users is available here.

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