Adverse Action Notice Law and Legal Definition

Adverse action is a creditor’s action refusing a credit application. A creditor refuses the terms of the application or refuses due to the termination or changes in the account. In case of refusal, a creditor must provide the applicant an adverse action notice to the applicant under Equal Credit Opportunity Act. Adverse action notice is a document explaining the reasons for creditor’s denial for an application. The notice advises a credit applicant or existing debtor of the denial of their request for credit.

The notice must include:

  • creditor's name and address;
  • a statement of the action taken;
  • a summary of the applicant's credit rights; and
  • reasons for the adverse action.