Adverse Action: How To Do It and What It Is

Some employers have remarked that they are confused by the Adverse Action Process that is required under the federal Fair Credit Reporting Act (FCRA). The federal law kicks in when you use a Consumer Reporting Agency to perform a background check (known as a consumer report) and decide not to hire the applicant based on something in the report.

The adverse action process itself is simple. It involves sending TWO separate letters to the applicant, along with the consumer report and a summary of their rights, so that the applicant has time to review the report for errors. The timing of the two letters would be such that the applicant has meaningful opportunity to review, reflect and react to the report in order to dispute any perceived inaccuracies in the report.

It is the responsibility of the Consumer Reporting Agency to reinvestigate any inaccurate information in the report.

The Adverse Action Process

The first letter — Pre-Adverse Action Letter — is sent to the applicant saying that his or her application is being considered and asking the applicant to review the report so that a hiring decision can be made. A copy of the report is sent with the Pre-Adverse Action letter. The letter also includes a statement of rights that has been prepared by the Federal Trade Commission. Then the applicant is given a period of time to review the report and to dispute any perceived inaccuracies with the background firm.

If the applicant has not disputed the contents of the report within a reasonable time, and the employer wants to make the hiring decision final, then the Adverse Action Letter itself is sent. That letter states that the applicant is no longer being considered for employment. A good practice is to send another copy of the Background Screening Report with the Adverse Action Letter, as well as the statement of rights, so there can never be a question of the applicant having received his or her report.

Although the FCRA law does not give a definite time interval between the first letter and the second, the intent of the law is to give the applicant sufficient time to review the report. Allowing a period as long as ten (10) business days between the first letter and the second letter should provide sufficient time to receive and react to the first letter before the second letter is sent.

Even though the Adverse Action Process has been initiated, the employer is under no requirement to hold the job open for the applicant. The employer can proceed with considering and hiring another candidate.

If the applicant disputes the contents of the report, and the dispute is successful, then the employer is always free to consider the applicant again for any open position. That would be a business decision. In other words, using the Adverse Action is not an impediment to the normal hiring process. Although it is an employer’s duty to send these letters, many employers delegate that task to their employment screening background firm.

For more information please see the article: ‘The FCRA in Four Easy Steps’ by ESR President Lester Rosen at

ESR has a quick and very responsive dispute resolution process if the applicant disputes a report. ESR feels strongly that both the employer and the applicant deserve an accurate report.