Adverse action is the process an employer follows when it may deny employment, withdraw an offer, terminate employment, or take another negative employment action based in whole or in part on information in a consumer report.
This guide is general information, not legal advice. Employers should confirm their workflow with counsel, especially when state or local fair chance laws apply.
Step 1: Confirm the report is tied to a permissible purpose
Before ordering a consumer report for employment, the employer should have a permissible purpose, provide the candidate with a standalone disclosure, and obtain written authorization. The report should be scoped to the role and jurisdiction.
If the employer is not ready to show that paper trail, it is not ready to order the report.
Step 2: Send pre-adverse action materials
Before making the final decision, the employer should send a pre-adverse action notice. The notice generally includes a copy of the consumer report relied on and the CFPB Summary of Rights under the FCRA.
The purpose is simple: the candidate must have a meaningful chance to review the report, identify inaccuracies, and provide context before the employer makes a final decision.
Step 3: Wait a reasonable period
Federal law does not specify one universal waiting period for every employment decision. Many employers use at least five business days, but state and local laws may require a longer period or additional steps.
During this window, track whether the candidate disputes the report. If a dispute is filed, the consumer reporting agency must conduct a reinvestigation. Under 15 U.S.C. 1681i, a consumer reporting agency generally must notify a furnisher of disputed information within five business days when the item is provided by a furnisher and must complete the reinvestigation within the applicable timeline.
Step 4: Send final adverse action notice only if the decision remains
If the employer still decides to take adverse action after the waiting period and any dispute workflow, the employer should send a final adverse action notice. The FTC explains that the notice should identify the consumer reporting agency, state that the agency did not make the hiring decision, and explain the candidate’s right to obtain another copy of the report and dispute its accuracy.
State and local rules can add more
New York City, California, Massachusetts, Illinois, and other jurisdictions can add timing, individualized assessment, notice, or record-use restrictions. Employers should avoid a one-size-fits-all workflow for all locations.
Information Direct supports employers by documenting report sources, keeping the Summary of Rights available, and helping clients map adverse action steps before the report creates a compliance problem.