Adverse action notice
A US notice telling a credit applicant about an adverse decision and the specific principal reasons for it.
Under the US Equal Credit Opportunity Act and Regulation B, a creditor that takes adverse action, such as declining an application, must notify the applicant and provide a statement of the specific principal reasons or disclose the right to receive them. The CFPB has stated in a circular that creditors using complex algorithms must still give specific and accurate reasons, and cannot rely on sample checklist reasons that do not reflect the actual ones. An agent involved in credit decisions must therefore produce reasons a person can verify.
Agent Minute explains this term on 25 December 2026.
Related terms
ExplainabilityThe degree to which the mechanisms behind an AI system's output can be described in terms people understand.Automated individual decision-makingA decision about a person made solely by automated means that has legal or similarly significant effects.High-risk AI systemAn AI system the EU AI Act classes as high-risk, such as credit scoring, which must meet strict requirements.Audit trailA chronological record of who accessed a system and what operations they performed, enough to reconstruct events.