Adverse Action Notices: What the FCRA Requires and How to Comply

What Is an Adverse Action Notice?

An adverse action notice is a written communication required by the Fair Credit Reporting Act (FCRA) whenever you deny a rental application, require a higher deposit, or impose other unfavorable terms based in whole or in part on information from a consumer report.

Consumer reports include credit reports, criminal background checks, eviction history reports, and any other report obtained from a consumer reporting agency. If the information from these reports influenced your decision in any way, the notice is required.

When You Must Send One

You must send an adverse action notice whenever you take adverse action based on a consumer report. Adverse action includes denying the application, approving with conditions (higher deposit, co-signer requirement), or renting at different terms than originally offered.

For rental decisions the FCRA requires one notice, sent when you take the adverse action. The two-step pre-adverse action process is an employment-screening rule, not a housing one, though giving an applicant a chance to explain a negative report before you decide is good practice.

What the Notice Must Include

A compliant adverse action notice must include the name, address, and phone number of the consumer reporting agency that furnished the report. It must state that the agency did not make the decision and cannot explain why it was made. It must inform the applicant of their right to obtain a free copy of the report within 60 days. It must inform them of their right to dispute the accuracy of the report directly with the agency. If a credit score was used, it must also disclose the score and the key factors that affected it.

You should also include the specific reasons for the denial. While the FCRA technically requires only the above elements, providing reasons is considered a best practice and is required in some states. Reasons should be factual and objective: credit score below minimum threshold, insufficient income, prior eviction, etc.

Common Mistakes Landlords Make

The most common mistake is simply not sending the notice. Many landlords reject applicants and move on without realizing they have a legal obligation. Other frequent errors include sending the notice too late, omitting the consumer reporting agency information, failing to include the applicant's rights, using vague reasons (did not meet our standards) instead of specific ones.

A willful violation can cost actual damages or statutory damages of $100 to $1,000 per applicant, plus punitive damages and attorney fees; a negligent one, actual damages and attorney fees. Class action suits against landlords with systematic FCRA violations can result in significant liability.

Automating Adverse Action Compliance

Screening platforms like TenantFort can generate clear screening decision notices automatically. When you decline an applicant, the system produces a notice with the specific reasons tied to your screening criteria and the applicant's options to respond. Note that a first-party decision notice is not a substitute for an FCRA adverse action notice: if you separately obtain a consumer report (credit, criminal, or eviction history) from a consumer reporting agency, you remain responsible for sending the FCRA notice that names that agency and discloses the applicant's dispute rights.