Adverse Action Notice
A notice the law requires when a consumer is denied credit, insurance, or employment based on a consumer report. FCRA sets its form and timing.
An adverse action notice is a written communication required by the Fair Credit Reporting Act (FCRA) when a consumer is denied credit, insurance, housing, or employment based in whole or in part on information in a consumer report. In insurance, adverse actions include denial of coverage, cancellation, non-renewal, or charging a higher premium.
The notice must tell the consumer that the adverse action was based on a consumer report, identify the reporting agency, and explain the consumer’s right to obtain a free copy of the report and dispute its accuracy. The notice must be provided in a timely manner, typically at the time of the adverse decision.
For AI governance, adverse action notices matter because many AI models use credit reports or other consumer-report data. If the model’s output contributes to the adverse action, the notice obligation may be triggered even if a human formally signs the decision. See our glossary entries on the Fair Credit Reporting Act and external consumer data.