Adverse Action Letter

Definition - What does Adverse Action Letter mean?

An adverse action letter is a written notice from an employer to a potential or existing employee advising them that an unfavorable decision has been reached relating to their employment as a result of the contents of their consumer report. The adverse action letter is required to comply with the Fair Credit Reporting Act and failure to do so could result in legal and financial consequences for an employer.

WorkplaceTesting explains Adverse Action Letter

According to the Fair Credit Reporting Act, employers that make use of consumer reports as a basis for employment-related decisions - such as promotions and hiring - are required to issue an adverse action letter to the applicant or employee if the decision adversely affects them. This notice is preceded by a pre-adverse action letter notifying the applicant or employee of the impending decision based on undesirable results in the consumer report. The employee is then afforded the opportunity to challenge the results of the report with the consumer report agency responsible for supplying it. There is no set time stipulated for the employer to wait before issuing the adverse action letter, however 5 business days after the issuing of the pre-adverse action letter has been deemed to be acceptable.

According to the act, the notice must contain the consumer report agency's name, address and contact number; a statement from the consumer report agency; notice of the applicant/employee's right to a free copy of their report within 60 days; and notice of the applicant/employee's right to contest the integrity of the report.

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