What Is Adverse Action, and How Do I Handle It the First Time? (With Template)

Adverse action is the two-step notice process federal law requires before you can turn down a candidate because of something on their background check.

You send a pre-adverse action notice with a copy of the report, wait, then send a final notice if you're still moving on without them. Skip either step and you've broken the Fair Credit Reporting Act, full stop.

I spent over a decade on the operations side of a background screening company, processing this exact paperwork for other people's mistakes. The two-step part isn't optional. It isn't a suggestion from your vendor either.

It's federal law, the FCRA, and it applies the moment a report might change your decision. Let's walk through it slowly, because the first time you do this, slow is the right speed.

The two steps, in the order you actually do them

Step one is pre-adverse action. You tell the candidate you're thinking about not hiring them because of the report, and you give them a real chance to respond before anything is final.

Step two is final adverse action. You send it only after the waiting period has passed and the candidate hasn't changed the outcome, usually by disputing something on the report.

That's the whole shape of it. Two letters, one wait in between. Everything else in this article is just filling in how to actually do each part.

Step one: send the pre-adverse action notice

The moment a background check comes back with something that might cost a candidate the job, before you decide anything, you send this notice.

It has to include two things: a copy of the actual report, and a document called "A Summary of Your Rights Under the Fair Credit Reporting Act." Your background check company should hand you that form as a standard part of the report.

Here's a usable template. Fill in the brackets and it works.

Send this by whatever method you can actually prove was delivered. Email with a read confirmation works. So does certified mail. A phone call does not, because you'll have nothing to show if this ever gets questioned.

How long do you actually have to wait?

This is the part I get asked most, and I want to be straight with you about it. Most employers use five business days as their internal standard, and you'll see that number all over the internet, including in some of our own articles. It's a reasonable, commonly used figure.

But here's the thing nobody likes hearing. The FCRA itself doesn't spell out one fixed number of days. What the law actually requires is that you give the candidate a reasonable amount of time to respond before you finalize anything.

Five business days has become the common practice because it's held up as reasonable in most situations. Not because a statute says "five" anywhere.

So to say that again a different way: five days is a safe, widely used default. It's not a number you're guaranteed to be legally covered by, no matter what.

Confirm the current standard with a lawyer or your background check company's compliance team before you lock a specific number into your policy. That part's not optional, even though I know it's tempting to just copy a number from an article and move on.

Step two: send the final adverse action notice

The waiting period passes. The candidate either didn't respond, or responded and the report still checks out. Now you send the second letter, and only now.

Notice what that letter doesn't do. It doesn't explain the report line by line, and it doesn't apologize for the decision. It states facts and points the candidate toward their actual rights. Keep it that plain.

What if the candidate disputes the report?

This is where a lot of first-timers freeze up. Don't. If a candidate contacts you during the waiting period to say the report is wrong, you pause. You don't send the final notice yet.

The candidate disputes the item directly with your background check company, not with you. Your provider is required to reinvestigate it.

If the report comes back corrected, you review the new version before deciding anything. If it comes back the same, most employers restart the waiting period from when the reinvestigation finishes, just to stay safe. Either way, you're deciding on accurate information.

That part's fine to feel awkward about. It should feel a little uncomfortable to hold a decision open. That discomfort is the system working the way it's supposed to.

Mistakes I see on someone's first time through this

Sending only the final notice and skipping pre-adverse action entirely. This is the big one, and it's the one that actually gets companies sued.

Forgetting to attach the summary of rights document to the pre-adverse notice. The letter alone isn't enough. It has to travel with that form every time.

Making the hiring decision, telling the hiring manager, and then sending the pre-adverse notice as a formality afterward. If the decision is already made in practice before the candidate gets a real chance to respond, you haven't followed the process. You've just documented that you skipped it.

Using a number of days you found in one article, including this one, without checking it against current guidance. Templates and standard practices are a starting point. They're not a substitute for a lawyer reading your actual policy once before you rely on it for real hires.

If you want a screening provider that builds these notices into their process automatically, instead of leaving you to draft them from scratch every time, All Screeners' matching tool can point you toward CRAs that already handle this well.

Want your whole adverse action process reviewed before your first real case? That's exactly what our True Fit consultation is for.