An adverse action notice is a written explanation a lender must give when it denies a credit application, offers less favorable terms than the applicant requested, or takes another unfavorable action on an account. It's required by federal law — the Equal Credit Opportunity Act (ECOA), and the Fair Credit Reporting Act (FCRA) whenever a credit report was part of the decision — and its job is to tell the applicant what happened, why, and what rights they have.
What is an adverse action notice in practice? If you've ever been turned down for a loan or credit card and received a letter explaining the decision, that letter was one. For lenders, sending it correctly and on time is a core compliance obligation.
When is an adverse action notice sent?
A lender sends one whenever it takes an unfavorable action on an application. The most common triggers are:
- A credit application is denied.
- Credit is approved on different terms than requested (a counteroffer the applicant doesn't accept).
- The terms of an existing account are changed unfavorably.
A counteroffer the applicant accepts is generally not adverse action. A denial or an unaccepted counteroffer is.
What's in an adverse action notice?
At a minimum, the notice tells the applicant:
- Who made the decision (the creditor's name and address).
- What action was taken.
- Why — the specific principal reasons, or how to request them within 60 days.
- The ECOA notice explaining that lenders can't discriminate on protected bases.
When the decision involved a credit report, the notice adds the consumer reporting agency's contact information, a statement that the agency didn't make the decision, the right to a free copy of the report within 60 days, the right to dispute anything inaccurate, and — if a credit score was used — the score itself.
Why two laws are involved
Two federal statutes require the notice, and lenders usually satisfy both with a single combined letter:
- ECOA (Regulation B) focuses on fair treatment — the reasons for the decision and the anti-discrimination notice.
- The FCRA focuses on the credit report — where the data came from and how to check or dispute it.
Lenders generally have 30 days from a completed application to send the notice.
What to do if you receive one
Read the reasons given. If a credit report was used, request your free copy from the named agency within 60 days and review it. If anything is inaccurate or incomplete, you have the right to dispute it with that agency — the notice will tell you how.
If you're a lender
The details matter: which reasons count as "specific," how to handle the credit score disclosure, the different deadlines for incomplete applications and counteroffers, and how long to keep the records. Our full adverse action notice walkthrough for lenders covers all of it.
Read the complete lender's guide. Every requirement, the combined FCRA + ECOA checklist, the 30-day timing rules, and the common mistakes — plus a free, ready-to-use notice template: Adverse Action Notice: A Lender's Guide.
This article is provided for informational and educational purposes only and does not constitute legal advice. Requirements change and vary by situation; confirm current requirements with qualified legal counsel before acting. Next scheduled review: February 2027.