What is an adverse action notice?

An adverse action notice is a communication provided to individuals when their application for credit, such as a loan or credit card, has been denied. This notice is a requirement under the Fair Credit Reporting Act, which aims to ensure transparency in the lending process. It informs the applicant about the negative action taken regarding their credit application and provides details on the reasons for the denial. Additionally, the notice typically outlines the applicant’s rights, including the right to request a copy of their credit report and the steps they can take to improve their creditworthiness in the future. This practice helps foster trust in financial institutions and promotes responsible lending.

The other options do not fit the definition of an adverse action notice. For instance, account opening rules pertain to the conditions under which a new account may be established, internal review documents focus on security aspects within the institution, and forms for minor account holders serve different administrative purposes, none of which relate to the denial of credit applications.