What is an Adverse Action?

Definition: A situation where someone is denied from accessing a particular service. It usually refers to a negative response from a job, credit or business application or any other request that is refused by institutions, businesses owners, employers, associations or governments based on negative information regarding the subject.

What Does Adverse Action Mean?

The concept of adverse actions is stated in different U.S. laws, providing lawful procedures to overturn them depending on their nature. Banks usually decide to send adverse action notices through formal correspondence or e-mails when loans or credits applications are denied frequently because they have found inadequate information in a client’s credit report or background check such as a collection of inactive accounts, bankruptcy filings, late payments on bank’s products, foreclosure notices and others. In this case, clients must be specifically informed about all the reasons why the adverse action took place because it is illegal to deny any request or application due to religious affiliation, political preferences, race, sex, nation of origin, color or any other attribute.

Also, during employee selection procedures employers consider the applicant’s background and reports to evaluate if they are fit for the position. In this regard, an adverse action notice might be used when the company decides not to hire a given applicant after they have been offered a job, but they haven’t passed a further stage of the process.


Mr. Jack is planning to make a few renovations on his house. He has sent all of the requirements to ask the bank for a loan to cover for the project expenses. Six days after his application, he received an adverse action as response. The letter notifies him that he was turned down for the loan, but it doesn’t explain why he was turned down.

So, he asked for a review of his credit report to get detailed information about bank’s denial reasons. He found a list of reasons including accumulated late payments on his credit card that lowered his credit rating and disqualified him as a borrower. He will have to wait almost two years to take this information out of his credit report.