Adverse Action Notice

An adverse action notice is the notification a creditor gives an applicant or borrower after taking adverse action on a credit application or an existing account. Under the Equal Credit Opportunity Act, adverse action means "a denial or revocation of credit, a change in the terms of an existing credit arrangement, or a refusal to grant credit in substantially the amount or on substantially the terms requested" (15 U.S.C. 1691(d)(6)). Regulation B, at 12 CFR 1002.9, requires the notification to be in writing and to contain the action taken, the creditor's name and address, a statement of the Act's anti-discrimination rule, the name and address of the federal agency that oversees the creditor, and either a statement of the specific reasons or a disclosure of the right to get them.

The name needs a word of explanation. Regulation B's own text calls the document a "notification" and the Fair Credit Reporting Act calls it a "notice of the adverse action"; "adverse action notice" is the everyday name for the single letter that usually satisfies both. When a creditor relied in whole or in part on a consumer report, the Fair Credit Reporting Act separately requires the notice to disclose the credit score used, to name the bureau that supplied the report with a statement that the bureau did not make the decision, and to explain your right to a free copy and to dispute it. The page for that Act sets out each of its required elements.

What counts as adverse action, and what does not. Regulation B's definition at 12 CFR 1002.2(c) covers a refusal to grant credit in substantially the amount or on the terms requested unless you accept or use a counteroffer, a termination or unfavorable change to an account that does not affect all or substantially all of a class of the creditor's accounts, and a refusal to raise your limit when you applied for an increase. It excludes a change you agreed to, any action taken because of inactivity, default or delinquency on that account, a declined transaction at the register (unless it reflects a termination, an unfavorable change or a refused increase), and a refusal because the law prohibits the credit or the creditor does not offer that kind of credit. The statute adds that refusing more credit to a delinquent account, or above an established limit, is not adverse action.

The Fair Credit Reporting Act's definition is wider. Under 15 U.S.C. 1681a(k) adverse action includes the ECOA meaning plus decisions about insurance, employment, certain licenses and benefits, and other consumer-initiated transactions such as a rental application, whenever the decision rests in whole or in part on a consumer report. So a landlord or an insurer can owe you a notice under that Act even though the Equal Credit Opportunity Act is not involved.

Timing. Regulation B requires notice within 30 days after receiving a completed application, within 30 days after taking adverse action on an incomplete application or an existing account, and within 90 days after a counteroffer you do not expressly accept or use. A lender holding an incomplete application may instead send a written notice listing what it still needs and a reasonable deadline (1002.9(c)).

Specific reasons. The statement must "be specific and indicate the principal reason(s)" for the decision, and Regulation B says that statements that the action was based on "internal standards or policies" or that the applicant "failed to achieve a qualifying score on the creditor's credit scoring system are insufficient" (1002.9(b)(2)). A creditor can either put the reasons in the notice or tell you that you may request them within 60 days, in which case it must give them within 30 days of receiving your request, with the name, address and telephone number of the office to ask. The Consumer Financial Protection Bureau issued two circulars on this rule, in 2022 and 2023, one on credit decisions based on complex algorithms and one on the proper use of Regulation B's sample forms; it withdrew both in May 2025, so the regulation's text is the rule to read.

Variations. A creditor that received no more than 150 applications in the preceding calendar year may notify orally (1002.9(d)). Where there are several applicants, notice to one is enough, and it must go to the primary applicant if one is apparent (1002.9(f)). Business credit has its own tiers, set out on the business credit score page. And a creditor that approves you on less favorable terms because of your credit report may owe a different document, the risk-based pricing notice under 15 U.S.C. 1681m(h), rather than an adverse action notice.

The notice follows a decision, and what you do next depends on which kind of notice you received.

1. Read whether reasons are included. If they are, they should name the principal factors, such as a high debt-to-income ratio, a short credit history or a recent delinquency.
2. If reasons are not included, request them. The notice must tell you whom to ask. Ask in writing within 60 days; the creditor has 30 days to respond.
3. If a credit report was used, get the free report. The notice names the bureau and tells you about your right to a free copy within 60 days. Check it for errors and dispute anything inaccurate with the bureau.
4. Keep the notice. It names the federal agency that supervises the lender, which is where a complaint goes if you think the decision was discriminatory.

For example: Oskar completes a credit card application on March 3. The issuer declines it on March 20, partly because his credit report shows a 60-day late payment. The issuer must notify him no later than April 2, 30 days after the completed application. Its letter states the decision, gives two specific reasons ("delinquent past or present credit obligations with others" and "length of employment"), includes the ECOA notice and the name of its regulator, and, because it used his report, discloses the score it relied on, names the bureau, and tells him he can get a free copy of that report within 60 days. If the letter had instead offered reasons on request, Oskar would have had until 60 days after the letter to ask, and the issuer 30 days from his request to answer.

Pros

• Turns a bare "no" into a stated reason the applicant can act on, whether by correcting a report, paying down debt or waiting out a delinquency.
• Names the credit bureau and the supervising agency, which tells the applicant exactly where to dispute an error or file a complaint.
• Applies to unfavorable changes on an existing account, not only to new applications.

Cons

• The reasons can be generic within the rule; a list of principal factors does not explain how much each mattered.
• Many outcomes fall outside the definition, including a declined purchase at the register and action on an account that is already delinquent.
• Small creditors may notify orally, which can leave the applicant with no written record of the decision or the reasons.
• The deadline for requesting reasons is short: where the notice offers reasons on request, the request must be made within 60 days.