Adverse Action Notice: What It Means Under Section 10(7)
Adverse Action Notice: What It Means Under Section 10(7)
When a company makes a decision that affects your credit or cost—like denying a benefit or increasing a charge—it’s not just about the decision itself.
What matters just as much is how that decision is explained to you.
Section 10(7) of the Consumer Reporting Act sets out rules for what must happen when outside information is used to make that kind of decision.
When This Rule Applies
This section applies when:
A benefit is denied (for example, credit is refused), or
A charge is increased (for example, higher interest or fees)
AND the decision is based on information from:
A consumer reporting agency, or
Another outside source
When that happens, specific notice must be given to the consumer.
Notice Must Be Given Right Away
At the exact time you are told about the decision, the company must also tell you that:
The decision was based partly or fully on outside information
This is not something that can be sent later or skipped. It must be included at the same time the decision is communicated.
Your Right to Ask for Details
After you receive that notice, you have 60 days to request more information.
If you make a request, the company must explain:
If the information came from a third party (not a consumer reporting agency):
What type of information was used
Where that information came from
If the information came from a consumer reporting agency:
The name of the consumer reporting agency
The address of the consumer reporting agency
This gives you a way to understand what influenced the decision.
What the Notice Must Include
The notice you receive must also clearly tell you:
That outside information was used
That you have the right to request more details
That you have 60 days to make that request
If this information is missing, the notice is incomplete.
Why This Matters
This rule is about transparency. It ensures that:
Decisions are not made in the dark
You can see what information affected you
You have a chance to question or correct that information
Without this notice, you may never know what influenced the decision or where it came from.
Kevin Hodge
Kevin Hodge helps consumers understand, correct, and protect their credit and consumer reports. He provides guidance on navigating consumer reporting agencies, privacy, and compliance, while sharing practical insights to improve transparency and accountability in the consumer reporting ecosystem.
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