Key Takeaways
- Adverse action letters notify an applicant of their rejection or conditional approval.
- It is a mandatory FCRA requirement if the decision is based on information from third parties.
- An adverse action letter should specify the source of the information used to disqualify the applicant.
- Landlords should send the notification within a reasonable time, usually 30 days.
- Tenants can dispute any inaccurate information used to disqualify them.
If an applicant fails their consumer reports or background check, you may reject their rental application or include additional conditions.
Based on the screening results, you may decide to increase the rent or deposit, require a cosigner, or demand upfront payments. Whatever adverse action you take, you must communicate your decision in writing, orally, or electronically.
It is the landlord’s responsibility to send an adverse action letter, meaning credit bureaus will not do it for you. An adverse action letter is also known as an adverse action notice.
What Is an Adverse Action Notice?
An Adverse Action Notice is a letter issued by a landlord or property manager informing a potential tenant that their rental application has been denied or conditionally accepted. In most cases, the reason is based on a background check done using their consumer report.
The FCRA (Fair Credit Reporting Act) defines "adverse action" very broadly in Section 603. They include all business, credit, and employment actions that adversely affect consumers. An adverse action is any unfavorable action a landlord takes against a renter or applicant.
You may create a standard adverse action letter to ensure uniformity and fairness, and ensure that the applicant receives the notice. Always check your local laws to determine compliance, as some States have stricter terms.
Who Is Responsible for Sending an Adverse Action Letter?
The FCRA (Fair Credit Reporting Act) and Fair Housing laws require landlords to send a notice of adverse action for any rental rejection letter sent.
Any conditionally approved application that requires additional consideration, such as an extra deposit or a cosigner, also requires a notice of adverse action. Begin with the title FCRA Adverse Action Letter Conditionally Approved, and then list the requirements.
The Fair Housing Act prohibits discrimination against tenants based on their gender, age, race, ethnicity, and other protected classes. It's still okay to reject tenants for reasons other than protected classes, such as:
- Their credit reports
- Criminal history
- References from other landlords
- Income, etc.
If you reject a tenant, it's best to do so in writing to prove your reasoning.
Any adverse actions you take should be legally justified. Once completed, you're responsible for giving an adverse action notice to applicants. Whether you email, send a mail, or speak with the applicant over the phone, you should protect their sensitive personal information.
What to do if a tenant fails a background check
Finding a tenant who will be considerate, responsible, and reliable takes work. An applicant with a bad tenant history, poor credit, or criminal history forces you to reconsider their qualifications.
The following are common adverse actions you can take as a landlord if a tenant meets your rental criteria but fails your background check based on their consumer report:
- Reject the application
- Require cosigners for the lease
- Strengthen deposit requirements
- Increase rent
Although these actions may be unfavorable to the tenant, they protect you from missed payments and other rental agreement violations.
How To Write an FCRA Adverse Action Letter for Apartments and Rentals
When writing an FCRA adverse action letter, apartment owners should specify their decision and the reasons for the action taken. You should check your local and federal laws to determine that the information you include is complete and meets all legal requirements.
Adverse action letters typically include the following information.
- Details of the owner/manager of the property
- Property details
- Notice date
- Applicant's name, the reason for the adverse action, and whether they have been denied or if additional conditions have been set for acceptance.
- Details of the Consumer Reporting Agency that processed the report (TransUnion, Equifax, Experian, etc.)
- Notification that the C.R.A. was not the final decision maker
- A confirmation that a 60-day free credit report is available to the applicant
- A statement that applicants have a right to dispute inaccurate information with the C.R.A.
Keep the letter concise and professional, and ensure it reaches the applicant promptly.
Start your Rental Application now
Adverse Action Letter FAQs
-
How many days do you have to send an adverse action letter?
You should send the adverse action notice within a reasonable period. The FCRA does not specify the period within which you must send an adverse action notice for apartments and rentals.
However, in compliance with Federal Regulation B, 30 days after receipt of the complete application is considered the standard maximum time to do so.
-
Can adverse action letters be emailed?
Yes. Electronic communication is a viable means of sending adverse action notices, provided it meets the FCRA regulations. You should also consider the ESIGN Act guidelines for electronic signatures.
The email must contain all the information a traditional paper notice would contain. Consider using secure, encrypted, or password-protected email to protect consumer information.
-
What is a pre-adverse action letter?
A pre-adverse action letter is a mandatory letter sent before an employment decision is finalized. It notifies the individual of the action an employer is considering, allowing them time to dispute or explain the findings before the final decision.
For example, an employer must send a pre-adverse action letter if they choose not to promote an employee based on specific findings.
Tenants can significantly influence your day-to-day property management experience and overall net investment return as a landlord. Therefore, it is essential to thoroughly screen potential tenants and select only those who will be good tenants.
If you use information from credit reports or other third parties to deny tenancy, you must send an adverse notice letter to inform the applicant of your decision.
Key Takeaways
- Adverse action letters notify an applicant of their rejection or conditional approval.
- It is a mandatory FCRA requirement if the decision is based on information from third parties.
- An adverse action letter should specify the source of the information used to disqualify the applicant.
- Landlords should send the notification within a reasonable time, usually 30 days.
- Tenants can dispute any inaccurate information used to disqualify them.
If an applicant fails their consumer reports or background check, you may reject their rental application or include additional conditions.
Based on the screening results, you may decide to increase the rent or deposit, require a cosigner, or demand upfront payments. Whatever adverse action you take, you must communicate your decision in writing, orally, or electronically.
It is the landlord’s responsibility to send an adverse action letter, meaning credit bureaus will not do it for you. An adverse action letter is also known as an adverse action notice.
What Is an Adverse Action Notice?
An Adverse Action Notice is a letter issued by a landlord or property manager informing a potential tenant that their rental application has been denied or conditionally accepted. In most cases, the reason is based on a background check done using their consumer report.
The FCRA (Fair Credit Reporting Act) defines "adverse action" very broadly in Section 603. They include all business, credit, and employment actions that adversely affect consumers. An adverse action is any unfavorable action a landlord takes against a renter or applicant.
You may create a standard adverse action letter to ensure uniformity and fairness, and ensure that the applicant receives the notice. Always check your local laws to determine compliance, as some States have stricter terms.
Who Is Responsible for Sending an Adverse Action Letter?
The FCRA (Fair Credit Reporting Act) and Fair Housing laws require landlords to send a notice of adverse action for any rental rejection letter sent.
Any conditionally approved application that requires additional consideration, such as an extra deposit or a cosigner, also requires a notice of adverse action. Begin with the title FCRA Adverse Action Letter Conditionally Approved, and then list the requirements.
The Fair Housing Act prohibits discrimination against tenants based on their gender, age, race, ethnicity, and other protected classes. It's still okay to reject tenants for reasons other than protected classes, such as:
- Their credit reports
- Criminal history
- References from other landlords
- Income, etc.
If you reject a tenant, it's best to do so in writing to prove your reasoning.
Any adverse actions you take should be legally justified. Once completed, you're responsible for giving an adverse action notice to applicants. Whether you email, send a mail, or speak with the applicant over the phone, you should protect their sensitive personal information.
What to do if a tenant fails a background check
Finding a tenant who will be considerate, responsible, and reliable takes work. An applicant with a bad tenant history, poor credit, or criminal history forces you to reconsider their qualifications.
The following are common adverse actions you can take as a landlord if a tenant meets your rental criteria but fails your background check based on their consumer report:
- Reject the application
- Require cosigners for the lease
- Strengthen deposit requirements
- Increase rent
Although these actions may be unfavorable to the tenant, they protect you from missed payments and other rental agreement violations.
How To Write an FCRA Adverse Action Letter for Apartments and Rentals
When writing an FCRA adverse action letter, apartment owners should specify their decision and the reasons for the action taken. You should check your local and federal laws to determine that the information you include is complete and meets all legal requirements.
Adverse action letters typically include the following information.
- Details of the owner/manager of the property
- Property details
- Notice date
- Applicant's name, the reason for the adverse action, and whether they have been denied or if additional conditions have been set for acceptance.
- Details of the Consumer Reporting Agency that processed the report (TransUnion, Equifax, Experian, etc.)
- Notification that the C.R.A. was not the final decision maker
- A confirmation that a 60-day free credit report is available to the applicant
- A statement that applicants have a right to dispute inaccurate information with the C.R.A.
Keep the letter concise and professional, and ensure it reaches the applicant promptly.
Start your Rental Application now
Adverse Action Letter FAQs
-
How many days do you have to send an adverse action letter?
You should send the adverse action notice within a reasonable period. The FCRA does not specify the period within which you must send an adverse action notice for apartments and rentals.
However, in compliance with Federal Regulation B, 30 days after receipt of the complete application is considered the standard maximum time to do so.
-
Can adverse action letters be emailed?
Yes. Electronic communication is a viable means of sending adverse action notices, provided it meets the FCRA regulations. You should also consider the ESIGN Act guidelines for electronic signatures.
The email must contain all the information a traditional paper notice would contain. Consider using secure, encrypted, or password-protected email to protect consumer information.
-
What is a pre-adverse action letter?
A pre-adverse action letter is a mandatory letter sent before an employment decision is finalized. It notifies the individual of the action an employer is considering, allowing them time to dispute or explain the findings before the final decision.
For example, an employer must send a pre-adverse action letter if they choose not to promote an employee based on specific findings.
Tenants can significantly influence your day-to-day property management experience and overall net investment return as a landlord. Therefore, it is essential to thoroughly screen potential tenants and select only those who will be good tenants.
If you use information from credit reports or other third parties to deny tenancy, you must send an adverse notice letter to inform the applicant of your decision.
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