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What is Adverse Action?

Posted in Frequently Asked Questions on 06/04/2007

What is Adverse Action?
Section 603(k)(1) of the Fair Credit Reporting Act (FCRA) states that an adverse action is “a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee.”  These decisions include not hiring, not retaining or not promoting an individual.

What does this mean for my company?
If your company uses a consumer report/investigative consumer report in whole or in part to deny someone employment or promotion, you are obligated under the FCRA to provide both Pre-Adverse and Adverse Action Disclosures to those applicants/employees.

What is a Pre-Adverse Action Disclosure?
The disclosure must contain information stating that an adverse employment action will be taken, a copy of the consumer report/investigative report, and a summary of the applicant’s/employee’s rights.  The disclosure must also include the consumer reporting agency’s name and contact information.  Once the applicant/employee receives the disclosure, he or she must be given sufficient time to dispute the information.

What is an Adverse Action Disclosure?
The Adverse Action Disclosure contains wording similar in nature to the Pre-Adverse Action Disclosure and must be done in a reasonable amount of time after the Pre-Adverse Action Disclosure.  The disclosure informs the applicant/employee of the final decision made by your company in not hiring, not retaining or not promoting an individual.

Do I need to do both the Pre-Adverse Action and the Adverse Action Disclosures?
Yes.  Both are required under the FCRA.

Where can I get samples of these disclosures?
You may either contact our office at 800-991-9694 or click here for samples of the Pre-Adverse and Adverse Action Disclosures.