The FCRA Adverse Action Process: A Step-by-Step Guide

What Is Adverse Action?

Under the FCRA, adverse action means any decision that negatively affects a job applicant or employee based — even in part — on a consumer report (background check). Examples include:

• Not hiring an applicant
• Terminating a current employee
• Denying a promotion
• Reassigning an employee to a lower position

If any of these decisions involve information from a background check, the FCRA's adverse action process applies.

Step 1: Receive and Review the Report

After the background check is complete and the MRO has reviewed any drug test results, you receive the final report. Review it carefully and determine whether any findings are relevant to the position.

Do not take adverse action based on information that is:

• Outside the applicable lookback period
• An arrest without conviction (in most circumstances)
• Unrelated to the position
• Potentially inaccurate

Step 2: Send the Pre-Adverse Action Notice

Before making any final adverse hiring decision, send the candidate:

1. A copy of the background check report
2. A copy of the FTC's "A Summary of Your Rights Under the Fair Credit Reporting Act"
3. A written notice that you are considering taking adverse action based on the report

This notice must be sent before the decision is finalized — not after.

Step 3: Wait a Reasonable Period

After sending the pre-adverse action notice, you must wait before finalizing the decision. This gives the candidate time to:

• Review the report for errors
• Contact the screening company to dispute inaccuracies
• Provide additional context or documentation

How long to wait: The FCRA does not specify a number of days. Courts and the FTC have interpreted "reasonable" as at least 5 business days. Many employers use 5–7 business days as standard practice. Some jurisdictions (like New York City) specify longer waiting periods.

Step 4: Review Any Response from the Candidate

If the candidate responds — disputing an inaccuracy or providing context — you must genuinely consider that information before making your final decision. If the candidate shows the report contains an error, the screening company must investigate the dispute within 30 days and correct any inaccurate information.

Step 5: Send the Final Adverse Action Notice

If you proceed with the adverse decision after the waiting period (and considering any candidate response), send the final adverse action notice. This must include:

• The name, address, and phone number of the consumer reporting agency that provided the report
• A statement that the CRA did not make the adverse decision and cannot explain why it was made
• A statement that the applicant may obtain a free copy of the report within 60 days
• A statement of the applicant's right to dispute the accuracy of the report with the CRA

Recordkeeping

Document each step of the process with dates:

• When the report was received
• When the pre-adverse action notice was sent
• When the waiting period ended
• Any response from the candidate and how it was addressed
• When the final adverse action notice was sent

Common Violations

• Sending pre-adverse and final notices simultaneously
• Not sending the pre-adverse notice at all
• Not waiting a reasonable time between notices
• Using a background check report that is more than 30 days old without reordering
• Not including the required CRA information in the final notice

At Do It Right Screening, we provide all required FCRA forms and can guide you through the adverse action process. Contact us for assistance.