If you have never believed in karma, it’s time to start thinking about it in the new terms. A credit score that reflects all the good deeds and wrongdoings of every citizen is one of its modern forms. A lot of financial institutions rely on such information. Although credit history is mainly used to give or deny loans, it may also influence the employment process. Companies cooperate with credit reporting agencies to evaluate current or potential employees and decide their future fate. Someone with a bad credit history is less likely to get an offer.
In case you are one of those who examine job or credit applicants, you must know that the use of credit score is strictly regulated. The Fair Credit Reporting Act (FCRA) requires you to obtain a signed background check disclosure and provide adverse action notices. Any time you make a negative decision based on the report from a credit bureau, you need to send a notice of adverse action letter.
Like any official document, adverse action notices may be challenging for non-professional mailers. They must be based on information of every individual, have a specific structure, and be sent according to a schedule. In other words, it’s quite hard to arrange these processes manually.
Fortunately, sending personal adverse action notices can be considerably simplified with direct mail automation. Continue reading to learn how it works and discover:
- What is an adverse action notice and when to use it?
- Adverse action notice requirements: structure, timing, and legal limitations.
- How can Inkit’s direct mail automation optimize the delivery of a notice of adverse action letter?
What Is an Adverse Action Notice and When You Need to Use It?
A notice of adverse action is a letter of explanation provided when an individual applying for credit is denied or offered less favorable terms based on their credit score. Adverse action notices are also often used when a job applicant is turned down because of a consumer report.
Such notifications establish a transparent and formal mechanism to inform citizens about the reasons behind the denial (“adverse action”). This minimizes the probability of mistake and gives individuals time to dispute the accuracy of the report if applicable. As a result, the relationships with applicants become more open and better regulated. Moreover, the party that provides notice of adverse action letter secures itself from any related penalties.
Generally, adverse action notices fall into two types:
- Pre-adverse action notices
Send such notifications if you are going to deny an application based on the background report but haven’t done that yet. This will warn the recipients about the probable outcome and enable them to voice any valid objections. Make sure to give a reasonable amount of time between the pre-adverse action notice delivery and the final denial. 5-10 business days is the recommended period, yet you need to additionally check it with your local legislation.
- Adverse action notices
This type of letter is sent to inform applicants about your final decision to deny their request. Individuals reserve the right to ask for a free copy of their consumer report from a credit bureau and challenge the results within 60 days.
Note: According to the Fair Credit Reporting Act, you also need to obtain a signed consent for the background check if you use it for pre-employment screening.
Why is a written notice of adverse action always better than an oral one? The answer is simple and quite predictable. Officially mailed documents serve as a physical proof of the notification. They are also more effective than electronic messages. Direct mail has at least 10 times higher response rates than digital marketing channels. By using it, you improve your chances to be noticed.
Apart from that, the written form is required to stay FCRA compliant. Find more information about the Fair Credit Reporting Act in the next section dedicated to the adverse action notice requirements.
Adverse Action Notice Requirements: Structure, Timing, and Legal Limitations
There are tons of samples of adverse action notices online. They differ in wording, formatting, and presentation but basically have the same structure. To save your time and make sure your notice of adverse action letter includes everything required, follow these main demands:
- Mention that the adverse action is based on information provided by the credit bureau.
- State that consumers have the right to request a free copy of their consumer report from the related agency within 60 days.
- Inform consumers that they can dispute the accuracy or completeness of the report or any information it includes within 60 days.
- Include the name, telephone number, and address of the credit bureau that provided the report.
- Stress that the credit bureau isn’t responsible for the decision and cannot provide the reasons for the adverse action.
- Indicate the credit score if it was used to make the decision.
Also, remember that such a notice is an official document with a legal force. Use the formal tone and clearly state all provisions. People that receive an adverse action notice should immediately understand its content and know what steps they can take if they don’t agree with the outcome.
The Fair Credit Reporting Act as the Main Legislative Measure Regulating Adverse Action Notices
The Fair Credit Reporting Act (FCRA) is federal legislation that aims to ensure the accuracy, fairness, and privacy of consumer information stored by consumer reporting agencies. It was originally passed in 1970 and enforced by the Consumer Financial Protection Bureau and the US Federal Trade Commission. This act regulates the collection, disclosure, and use of consumer credit information. Therefore, in case your company or financial organization refers to such data for any purpose, you must provide consumers with the corresponding notice.
We also recommend consulting with an attorney that specializes in your local regulations since some US states have different credit reporting laws. In case you use consumer credit information for employment, you should also check EEOC rules.
How Can Inkit’s Direct Mail Automation Optimize the Delivery of a Notice of Adverse Action Letter?
Direct mail automation is mostly associated with the use of mail marketing as one of the marketing channels. Fair enough, marketing automation platforms like Inkit offer great opportunities for building omni-channel campaigns.
Despite the efficiency of direct mail automation for your marketing endeavors, today we’ll recommend it for sending adverse action notices. You just need to upload a CSV file with customer data or integrate CRM lists to start producing the mail. Inkit automatically processes customer information and includes the necessary details thanks to variable data printing. This way, you can send a unique, personalized notice of adverse action letter to every consumer. It’s absolutely critical for this type of reporting since denial reasons or credit score usually differ.
Once personalized mail pieces are printed, they are automatically delivered within 3-6 business days. You can track the whole process and maintain full control over every stage. With such quick production and delivery, it’s easy to give consumers enough time to dispute the results. You will stay regulatory compliant and meet deadlines.
Besides, Inkit’s direct mail automation significantly cuts mail fulfillment expenses and enhances customer data security.
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