An adverse action notice is the letter the Fair Credit Reporting Act requires an employer to send when it decides not to hire, promote, or retain someone based in whole or in part on a background check report from a consumer reporting agency. It must follow a pre-adverse action notice that gives the person a chance to respond.
Key takeaways
- FCRA notices apply when the report comes from a consumer reporting agency, such as a background screening company.
- The process has two steps: a pre-adverse action notice with the report, then the final adverse action notice.
- Employers typically wait about five business days between the two to allow a response.
- Many states and cities add fair chance rules that require an individualized assessment.
How adverse action notice works
Before running a background check through a screening company, employers must give a standalone written disclosure and get written authorization. If something in the report may lead to a negative decision, the employer sends a pre-adverse action notice, including a copy of the report and the CFPB's "A Summary of Your Rights Under the Fair Credit Reporting Act" (FTC, Using consumer reports: what employers need to know).
After a reasonable waiting period, the employer can make its final decision. If it's negative, it sends the adverse action notice. That notice must include the screening company's name, address, and phone number; a statement that the company didn't make the decision and can't explain it; and notice of the person's right to dispute the report and get a free copy within 60 days.
State and local fair chance laws, such as those in California, Illinois, and New York City, often require an individualized assessment of criminal history and additional notices or waiting periods.
Adverse action notice example
A logistics company makes a conditional offer to a driver. The background check shows a reckless driving conviction from six years ago. HR sends a pre-adverse action notice with the report and the summary of rights. The candidate responds that the conviction was later reduced and provides court records. The screening company corrects the report, and the company proceeds with the hire. Without the pre-adverse step, the company would have lost a qualified driver and violated the FCRA.
Why adverse action notice matters for employers
FCRA violations lead to class actions because technical errors, such as a disclosure with extra language, repeat across every applicant. Statutory damages of $100 to $1,000 per person, plus attorney fees, add up quickly at scale.
Background screening software and reputable screening companies build these notices into the workflow. Our pre-adverse action notice email and background check notice templates help, but confirm state requirements before you rely on them.
Common adverse action notice mistakes to avoid
Combining the disclosure with other forms
The FCRA disclosure must be a standalone document.
Skipping the pre-adverse step
Applicants must get the report and a chance to respond before a final decision.
Using a fixed disqualification list
Blanket exclusions for any conviction raise discrimination risks; assess relevance to the job.
Ignoring local fair chance laws
Many cities and states add timing and assessment rules.
Adverse action notice: questions people also ask
When is an adverse action notice required?
What must an adverse action notice include?
How long should an employer wait after a pre-adverse action notice?
Does the FCRA apply to in-house background checks?
Is a pre-adverse action notice the same as a rejection?
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HRTally glossary entries are written by people who have run US payroll, benefits, and HR operations, then checked line by line against primary sources such as the IRS, Department of Labor, EEOC, and Bureau of Labor Statistics. Dollar limits and rates are for 2026 unless stated. We review every entry at least twice a year and whenever a rule changes. This page explains general rules and isn't legal or tax advice; state law can differ. Read our editorial standards.
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<blockquote>An adverse action notice is the letter the Fair Credit Reporting Act requires an employer to send when it decides not to hire, promote, or retain someone based in whole or in part on a background check report from a consumer reporting agency. It must follow a pre-adverse action notice that gives the person a chance to respond.</blockquote><p>Source: <a href="https://www.hrtally.com/hr-glossary/adverse-action-notice/">HRTally HR Glossary, Adverse action notice</a></p>
Written by the HRTally Research Team
Our guides are written and reviewed by people with hands-on US HR, payroll, and HR technology experience. Legal and tax facts are checked against primary sources, such as the Department of Labor, IRS, EEOC, and USCIS, and linked at the end of each guide. Vendors never review or pay for our editorial content.