Adverse Actions

Under federal law (the Equal Credit Opportunity Act, or ECOA) creditors have very specific notice obligations when they take an adverse action on a credit application. The basis requirements are designed to ensure transparency and prevent discrimination.

In short: Under ECOA, applicants are entitled to a timely, specific, written explanation of adverse credit decisions, along with their anti-discrimination rights.

An Overview of Your Rights

A woman checking her mail and reading an adverse action notice she received, with a worried expression on her face.

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📌 What Counts as an “Adverse Action”

A denial of credit (in whole or part).
A reduction in credit limit or revocation of existing credit.
An unfavorable change in terms (unless due to default or delinquency).
A refusal to grant credit on substantially the terms requested.

📌 Entitlement to a Statement of Reasons

If a creditor takes an adverse action, the applicant has the right to a clear statement of reasons. This must:

Be in writing, unless the creditor provides oral notice first and informs the applicant of their right to request written reasons.
Be provided within 30 days of the adverse action.
Include specific reasons—not vague or overly general. For example, “insufficient income” is acceptable, but “credit score too low” without explanation is not.

📌 Required Content of Adverse Action Notices

A proper ECOA adverse action notice must include:

The creditor’s name and address.
The specific reasons for the action, or a disclosure of the right to request them within 60 days.
ECOA notice of rights (the “Regulation B notice”), typically in standard form:

“The Federal Equal Credit Opportunity Act prohibits creditors from discriminating against credit applicants on the basis of race, color, religion, national origin, sex, marital status, age…”
Contact information for the federal agency that enforces ECOA for that creditor.

📌 Distinction from FCRA Notices

Sometimes creditors rely on information in a consumer report when denying credit. In those cases:

The Fair Credit Reporting Act (FCRA) requires a separate “adverse action notice” with:
- The credit bureau’s name, address, and phone number,
- A statement that the bureau did not make the decision,
- Notice of the right to obtain a free report and dispute inaccuracies.
  So, many creditors combine ECOA + FCRA notices in one letter.

📌 Enforcement & Remedies

Failure to give a proper ECOA adverse action notice is itself a statutory violation, even if no discrimination occurred.

An adverse action letter denying credit to a consumer