What is an "adverse action" according to the FCRA?

An "adverse action" according to the Fair Credit Reporting Act (FCRA) specifically refers to a decision made by a creditor or lender that negatively impacts the consumer's ability to obtain credit or services. This includes situations such as the denial of credit or a loan application. When a lender denies credit based on information contained in a consumer's credit report, it qualifies as an adverse action because it results in a negative outcome for the consumer.

The concept of adverse action is important in the context of the FCRA because it requires creditors to provide specific notifications to consumers when adverse actions are taken, ensuring transparency and allowing consumers to understand the factors influencing such decisions. In contrast, actions like approving credit or acknowledging good payment history are favorable and do not fall under the definition of adverse actions. In these cases, the consumer experiences a positive outcome rather than a negative one.