Adverse action notice: the two-step process employers skip

An adverse action notice is what an employer must send when it decides not to hire someone — or to terminate, or not to promote — based in whole or in part on information in a consumer report. The Fair Credit Reporting Act treats that as a decision the person is entitled to contest, and builds a two-stage process around it.

The two stages exist for a specific reason: consumer reports contain errors, and the person named is the only one likely to spot them. A record belonging to somebody with a similar name, a charge that was dismissed, a conviction reported beyond the permitted period — the pre-adverse stage is the window in which those get corrected before the decision becomes final.

The two adverse action notice steps

1. Pre-adverse action notice: sent before the decision is final, with a copy of the consumer report and the Summary of Your Rights Under the FCRA. It tells the person what the report says and that a decision is pending.
2. A reasonable waiting period, during which the person can dispute the accuracy of the report with the agency or explain it to you. What counts as reasonable is not fixed in the statute; a commonly used period is around five business days.
3. Consider anything the person provides. This step is not decorative — a process where the response arrives and is filed unread is one that produces the wrong outcome and no defence.
4. Final adverse action notice: sent once the decision is made, naming the consumer reporting agency with its contact details, stating that the agency did not make the decision and cannot explain it, and setting out the right to a free copy of the report and to dispute its accuracy.

Where employers get it wrong

Three failures recur. Sending only the final notice, which removes the entire point of the process. Making the decision internally and treating the pre-adverse letter as a formality, so the waiting period runs while the requisition is already being filled. And omitting the required content from the final notice — the agency’s details and the statement that the agency did not make the decision are mandatory, not courtesies. All three are visible on the face of the documents, which is why this is a common source of claims.

Assess relevance before you get to the letters. Several states and cities restrict what may be considered, when it may be asked about, and require an individualised assessment of the offence against the role. A process that jumps from report to rejection without that assessment can be lawful under the FCRA and unlawful locally.

Adverse action is not only about hiring

The same obligation arises in credit and in tenancy: a landlord declining an applicant on the basis of a tenant screening report, or a lender declining an application, owes a comparable notice with the reasons and the agency’s details. The mechanics differ between the employment and credit contexts, and the terminology is shared, which is why searching for a template without specifying the context reliably produces the wrong one.

Keeping the sequence evidenced

What matters in a dispute is that the sequence happened and can be shown: what was sent, when, what came back, what was considered. Ettex Docs holds the two letter templates with version history, Ettex Records keeps the sent copies, the report, the waiting period dates and any response per candidate, and the authorisation that made the report lawful in the first place is covered in background check authorization form.

To be clear: not legal advice. The required content, the reasonable interval and the local rules on considering criminal history vary and change; employment counsel should approve the templates and the timing once, after which the process is administrative.