Adverse and Pre-Adverse Action Letters FAQ

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 the Pre-Adverse and the Adverse Action Letters to those applicants/employees. usually this is the responsibility of the hiring authority (HR), though CRA's may choose to provide these letters as a service.

What is a Pre-Adverse Action Letter?

The Pre-Adverse Action Letter is a disclosure of possible adverse action. 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 reasonable time to dispute the information. While there is no time limit specified in the FCRA, legal opinion states five to seven business days as reasonable.

What is an Adverse Action Letter?

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

How to send an Adverse Letter?

The Adverse and Pre-Adverse Action Letters are ordered as searches and attached to a report. It is then possible to print out the report (either by you or your client) and mail the report, along with the letter to the applicant. You can also email report again to applicant or they can view them in the applicant portal. The letters are not automatically sent by the system.

 

Do I need to do both the Pre-Adverse Action and the Adverse Action Letters?

Yes. Both are required under the FCRA.

**Please Note:  The tools are made available to the CRAs to update the Pre Adverse/ Adverse letters in order to stay compliant. This can be done by going to System Settings -> Pre-Adverse/ Adverse -> Edit **