Adverse Action Notices for Landlords: How to Deny a Rental Application Under the FCRA

An adverse action notice is the one piece of paperwork most small landlords skip, and it is the one that federal law actually requires. If you deny an applicant, ask for a bigger deposit, or require a co-signer because of something in a tenant screening report, the Fair Credit Reporting Act (FCRA) says you must tell the applicant. This guide explains what an adverse action notice is, when you owe one, what it has to say, and how to make it a two-minute habit instead of a liability.

What counts as an adverse action?

Most people assume adverse action means a flat denial. It is broader than that. According to the FTC's guide for landlords, adverse actions include denying the application, requiring a co-signer, requiring a deposit that other applicants would not have to pay, requiring a larger deposit, and charging higher rent than you would charge another applicant.

The trigger is simple: the decision was based in whole or in part on information in a consumer report. A credit report, a criminal records search, an eviction history search, and a full tenant screening package all count as consumer reports when a screening company prepares them for you.

What the notice must include

The notice does not have to be long or formal, but it must contain specific information. The FTC lists three required elements:

• The name, address, and phone number of the consumer reporting agency (CRA) that supplied the report.
• A statement that the CRA did not make the decision and cannot explain why it was made.
• A notice of the applicant's right to dispute the accuracy or completeness of the report, and to get a free copy from the CRA if they ask within 60 days.

You are not required to list your reasons under the FCRA itself, though many landlords choose to. If you do, keep it factual and tied to your written rental criteria, such as "income below three times monthly rent" or "eviction judgment within the past five years."

Oral, written, or electronic?

The FCRA allows the notice to be given orally, in writing, or electronically. The FTC's position is that written notices are the best practice because they benefit both sides: the applicant gets information they can act on, and you get a record showing you complied. A short email or letter with the three required elements is enough. Keep a copy with the application file.

What happens after the applicant gets the notice

The notice points the applicant to the screening company, not to you, for questions about the report. That is intentional. The applicant can request a free copy and dispute anything inaccurate. The CFPB explains that the screening company generally has 30 days to investigate a dispute, and 45 days in some cases. If a record turns out to be wrong, the applicant may come back to you with a corrected report. You are not obligated to hold the unit, but many landlords will reconsider if the vacancy is still open.

Common mistakes to avoid

The most frequent problem is not sending the notice at all, especially when the applicant simply does not hear back. Silence after a report-based denial is still an adverse action without a notice. A second mistake is naming yourself or your property manager as the source of the information instead of the screening company. A third is treating a "conditional approval" that requires a larger deposit as something other than adverse action; the FTC specifically lists higher deposits and co-signer requirements.

Also remember that the FCRA is not the only rule in play. Fair housing laws apply to how you set and apply your criteria, and some states and cities add their own notice requirements or waiting periods. This article is general information, not legal advice. If you manage units in several states or are unsure how a local rule applies, a quick conversation with a landlord-tenant attorney is worth the cost.

A simple adverse action routine

Build the notice into your process so you never have to think about it. Write your rental criteria down before you advertise the unit. Run the same screening package on every adult applicant. When a report leads to a denial or a tougher term, send a written notice the same day using a template that already includes the screening company's contact information, the "did not make the decision" statement, and the 60-day free-report and dispute language. File the application, the report, and the notice together, then securely shred or delete the report once you no longer need it, as the FTC's disposal rule requires.

Run tenant screening the compliant way

Background Check Solutions has provided FCRA-compliant screening since 1982, and our reports give you exactly what an adverse action notice needs: the screening company's name and contact information, plus a clear record of what was reviewed. New tenant-screening customers get our special of $29.95 for a credit report, criminal search, and eviction search for the first 60 days, with no monthly or sign-up fees. Start your tenant screening order online here.