Compliance and Regulation Updates

Electronic Adverse Action Notices


Employers who use outside employment screening services are bound by FCRA regulations concerning pre-adverse and adverse action notices.

Before you make a decision

Before making an adverse decision based on our report, you must notify the subject of the report about your intent and provide him or her a copy of our report and the Consumer Financial Protection Bureau’s “Summary of Your Rights Under the Fair Credit Reporting Act”. This is meant to give the applicant a reasonable opportunity to explain or dispute the details of the information contained in the background report.

Wait a reasonable amount of time

No less than five business days after sending out the pre-adverse notice, can you notify the applicant about the adverse decision.

How does the electronic pre-adverse and adverse action service work

While ordering background checks, you will be asked to provide the email address for the applicant. Certain conditions are pre-defined in the system as requiring a pre-adverse-action notice. There are times when you would be informed that a report “needs attention” and you would need to log in and make a final decision, which would then trigger the letter.

If the system has sent out a pre-adverse notice, then the report will need an adverse-action decision. Per the FCRA, the employer must wait a “reasonable” amount of time after the pre-adverse notification is sent so that the consumer can review and potentially dispute the report.
Thus, after a pre-adverse notice is sent out, the report will be in a Hold status for a certain number of business days, only after which can the business user make a decision about adverse action. The default (and minimum) is 5 business days (the FTC has indicated this can constitute a “reasonable” time).

After the minimum number of business days has passed, the report status will change from Hold to Needs Attention. If you then access the report, you would typically see a new section on the report asking you to make a decision. If the final decision is “Fail,” then an adverse action email is sent to the consumer.

The exception to this process is in cases when the report is under dispute AND would normally allow you to make an adverse decision. In these instances, the inbox will instead show a message that a dispute has been opened, you cannot take adverse action at this time, and to check back later.

You can customize your adverse action process in a number of ways. First, you can change the business day delay between the original pre-adverse-action notice and the final adverse-action notice. As stated previously, this number cannot be less than 5 per the FTC guidance, and has an upper limit of 20 days.

Additionally, if your organization has custom notices you would like to use, can accommodate that easily.

We’ll also send a number of reports at regular intervals (the default is 1 week but this too is customizable) to keep you up-to-date on your adverse action program.

The video will give you a quick overview of the entire process.

Be sure. Be confident. Be fast, efficient, and consistent.

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