Final answer:
Adverse action under the Fair Credit Reporting Act (FCRA) is any action with negative effects on a consumer's credit, such as denying or altering terms of service. This requires the company to provide a notification that includes credit reporting agency details and dispute rights.
Step-by-step explanation:
Under the Fair Credit Reporting Act (FCRA), adverse action is defined as any action by a lender, company, or individual that has a negative effect on an individual's credit. When a company takes an adverse action against a consumer, such as denying a product or service or unfavorably altering the terms of that service due to information in their credit report, it must notify the consumer.
Adverse actions include denying credit, insurance, employment, or any other decision for eligibility that negatively impacts a consumer. The notification includes information on the specific credit reporting agency that supplied the report, as well as details on how to obtain a free copy of the credit report and dispute inaccuracies. Actions like offering a new product, requesting consumer opt-outs, or using permissible purposes for credit reporting, do not constitute adverse actions under the FCRA.