Understanding the Adverse Action Process: A Step-by-Step Guide for Employers

When it comes to background checks, what you do after receiving the results matters just as much as what you screen for in the first place. One of the most common (and costly) compliance missteps we see is skipping or mishandling the adverse action process — a required step under the Fair Credit Reporting Act (FCRA) when an employment decision may be or is influenced by the results of a consumer report.

At Unique Background Solutions, we guide our clients through this process every day. Here’s what employers need to know to stay compliant, protect their reputation, and treat candidates fairly.

What Is Adverse Action?

Adverse action refers to any decision made against a candidate based on information in a consumer report — like denying employment, rescinding an offer, or reassigning a current employee. Even considering taking action requires a very specific process.

Skipping this process, or doing it incorrectly, opens your business up to lawsuits, fines, and reputational harm — even if your decision was otherwise justified.

The 3-Step Adverse Action Process

Here’s a breakdown of how the adverse action process should work:

Step 1: Pre-Adverse Action Notice

If you're considering taking action based on a report (e.g., criminal history, motor vehicle report, failed drug test), you must first send a Pre-Adverse Action Notice to the candidate. This includes:

• A copy of the consumer report used to make the decision

• A copy of the “Summary of Rights Under the FCRA”

• A written notice (can be email or mail) informing them of the potential decision

Why it matters: This gives the candidate a fair chance to review the report and dispute any inaccuracies before you make a final decision.

Step 2: Waiting Period

You must allow the applicant a reasonable amount of time to respond — typically 5 business days, though some employers choose longer to be cautious.

During this time:

The candidate may dispute the report with the Consumer Reporting Agency (that’s us)

If corrections are made, you’ll receive an updated report

You can hold off on the final decision until the dispute is resolved

Step 3: Final Adverse Action Notice

If you decide to move forward after the waiting period, you must send a Final Adverse Action Notice. This must include:

• A clear statement that the decision is being made

• The contact information of the Consumer Reporting Agency

• A reminder that the CRA did not make the decision

• Notification of the candidate’s rights to dispute or request another copy

  
  

Pro tip: Keep documentation of this entire process for compliance purposes — especially if you’re ever audited or challenged.

Why Employers Get This Wrong

They act too fast: Making a decision before sending the pre-adverse notice is a violation.

They don’t send both notices: Many only send one or the other — which isn’t compliant.

They rely on auto-generated emails without checking them: Always ensure your workflow matches legal requirements.

They don't document the waiting period.

How Unique Background Solutions Helps

We’ve built adverse action compliance right into our workflow through EZyCheck to help you:

• Automatically generate compliant notices

• Track when notices were sent

• Provide secure report copies to candidates

• Maintain documentation for your records

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And when there’s a gray area? Our trained team is just a phone call away — no ticket systems, no waiting.

Closing

Adverse action isn’t just a formality — it’s a critical part of treating candidates fairly and operating within the law. Whether you're hiring staff, onboarding volunteers, or managing a multi-state workforce, we’re here to help you stay compliant and confident.

Need help reviewing your adverse action process? Let’s talk — we’ll make sure your team has the tools and support to get it right.