A pre-adverse action letter is a notice sent to a person applying for credit, employment, rental property, and other financial-related actions to inform them that information revealed in a consumer report could impact their application. Sending the notice ahead of a formal decision gives the applicant the ability to dispute information contained in the report, and is a requirement per the Fair Credit Reporting Act (FCRA).
The notice is relatively simple; it includes the contact information of the applicant, the credit reporting agency that supplied the report, and a summary of the applicant’s rights under the FCRA.
In addition to the notice and rights summary, the issuer needs to attach the applicant’s full report.
How to Use
The pre-adverse action letter needs to be sent prior to making a decision on the consumer’s application. This provides them with ample time to go through the report to ensure it contains accurate, up-to-date information. It is recommended that the letter is sent via mail, although the FCRA also permits consumers to be informed electronically and verbally. Should the recipient find an issue with the report, they can file a claim with the credit reporting agency. If the agency finds the consumer’s claim of wrongful information is false, the claim may be denied.
To formally deny the consumer, they will need to be sent an official adverse action notice.