20.2 FCRA Adverse Action Notices and Credit Score Disclosures

3. Adverse Action Disclosures Under FCRA § 615(a)

Whenever a financial institution takes adverse action against a consumer based in whole or in part on information in a consumer report, it must provide a formal FCRA Adverse Action Notice.

Statutory Triggers

Under FCRA § 603(k), adverse action includes:

• A denial or cancellation of, an increase in any charge for, or a reduction or other unfavorable change in the terms of, any credit, insurance, or other benefit;
• A denial of employment or any other employment decision that adversely affects a current or prospective employee; or
• An action taken or determination that is adverse to the interests of the consumer in connection with an application initiated by the consumer.

Unlike ECOA, where adverse action applies exclusively to credit transactions, FCRA adverse action applies across credit, deposit accounts (e.g., closing or denying a checking account based on ChexSystems), insurance, and employment.

Mandatory Content of the FCRA Adverse Action Notice (§ 615(a))

The notice, which may be oral, written or electronic under FCRA subject to the written or electronic credit-score requirement, must clearly and conspicuously disclose:

1. Reliance Statement: That adverse action was based in whole or in part on information contained in a consumer report.
2. CRA Contact Information: The name, physical address, and telephone number of the CRA (toll-free for a nationwide CRA) that furnished the report.
3. CRA Role Disclaimer: A statement that the CRA did not make the credit or underwriting decision and is unable to supply the consumer with the specific reasons why the adverse action was taken.
4. Free Report Right: Notice of the consumer's right to obtain a free copy of the consumer report from the CRA within 60 calendar days of receiving the notice.
5. Dispute Right: Notice of the consumer's right to dispute the accuracy or completeness of any information furnished by the CRA directly with the CRA.

Mandatory Credit Score Disclosure (§ 615(a)(2))

Pursuant to Section 1100F of the Dodd-Frank Act, if a creditor takes adverse action and used a numerical credit score in making the decision, the adverse action notice must disclose:

• The numerical credit score used in taking the adverse action;
• The range of possible credit scores under the model used (e.g., 300 to 850);
• All of the key factors that adversely affected the credit score of the consumer in the model used, listed in the order of their importance, not to exceed four key factors (except that if the number of credit inquiries was a key factor, inquiries must be disclosed as an additional fifth factor);
• The date on which the credit score was created; and
• The name of the person or entity that created the credit score or credit scoring model.

---

4. Adverse Action from Third Parties Other Than CRAs (§ 615(b))

When a creditor denies credit or increases charges based on information obtained from a third party other than a CRA (such as an employer, landlord, or personal reference):

• The creditor must clearly disclose the consumer's right to make a written request within 60 calendar days of notification to learn the nature of the information.
• The creditor must disclose the nature of the information within a reasonable period of time following receipt of the consumer's written request.

---

5. Integrating ECOA (Regulation B) & FCRA (Regulation V) Adverse Action Notices

Financial institutions must integrate ECOA and FCRA mandates when issuing adverse action notifications. While creditors routinely combine both disclosures onto a unified form (such as CFPB Regulation B Appendix C Model Forms C-1 through C-5), compliance professionals must distinguish the underlying legal sources.

Purpose and authorization limits

Marriage, being an authorized user, or living at the applicant’s address does not itself create a permissible purpose to obtain someone’s report. Apply the actual statutory purpose and transaction facts. Employment reports require the separate disclosure and written authorization; an authorization can appear in that disclosure document as permitted by the statute. Before adverse employment action, provide the report and summary of rights and allow an appropriate opportunity to respond. FCRA adverse action has no universal 30-day clock identical to Regulation B. Willful violations may support statutory damages of 100 to 1,000 dollars in an eligible consumer action, along with other remedies; negligent violations have a different actual-damages standard.