Background Screening - Pre-Adverse & Adverse Action

When an employer uses information from a third-party background screening report to consider an unfavorable employment decision, the Fair Credit Reporting Act generally creates a two-stage process.

Before the decision becomes final, the employer generally provides the applicant or employee with a copy of the consumer report and the prescribed Summary of Rights. This is commonly called pre-adverse action. If the employer later makes the unfavorable decision, it provides a separate adverse-action notice containing information required by the FCRA.

The purpose of the process is significant. It gives the individual an opportunity to review the background report before the employer acts finally on information that may be inaccurate, incomplete or associated with the wrong person.

This guide focuses on the federal FCRA framework. State and local fair-chance laws, employment laws and other requirements may impose additional obligations, timing requirements or assessments.

Source: FTC — Using Consumer Reports: What Employers Need to Know

Key Takeaways for Employers

• Adverse action is broader than simply refusing to hire someone.
• The FCRA process can apply when consumer-report information contributes in whole or in part to an unfavorable employment decision.
• Pre-adverse action occurs before the employer finalizes the decision.
• The applicant or employee generally receives the report being relied upon and the prescribed Summary of Rights.
• The FCRA does not establish one universal federal five-business-day waiting period.
• Employers should provide a meaningful opportunity to review and respond before finalizing the decision.
• State and local laws may impose additional requirements or specific timelines.
• The CRA investigates disputes about the consumer report; the employer makes the employment decision.
• After the employer actually takes adverse action, a separate notice is required.
• Good adverse-action procedures protect both the individual and the employer.

1. What Is “Adverse Action” in Employment?

Under the FCRA, adverse action in the employment context includes a denial of employment or another employment decision that adversely affects a current or prospective employee. The statute defines employment purposes broadly enough to include employment, promotion, reassignment and retention.

That means adverse action can include more than “We decided not to hire you.” Depending on the circumstances, it may include decisions such as:

• withdrawing a conditional job offer;
• refusing to hire an applicant;
• denying a promotion;
• reassigning an employee unfavorably;
• terminating employment;
• deciding not to retain an employee; or
• another employment decision that adversely affects the individual.

The key question is whether information in a consumer report played a role in the unfavorable employment decision.

“Based in Whole or in Part” Matters

The consumer report does not necessarily have to be the employer’s only reason for the decision.

The FCRA’s adverse-action provisions apply when the employment action is based in whole or in part on information contained in the consumer report.

For example, an employer may have concerns about both information developed during interviews and a record contained in the background report. If the consumer report contributed to the adverse decision, the employer should evaluate whether the FCRA adverse-action process applies rather than assuming that another contributing reason eliminates the requirement.

Source: 15 U.S.C. § 1681a — Definitions

2. Why Is There a Two-Step Process?

The two-stage process separates considering an adverse decision from actually taking the adverse action.

That distinction creates an opportunity for the individual to review the information before the decision is final.

The FTC explains that giving the report and Summary of Rights in advance allows the applicant or employee to review the report and tell the employer if it is correct.

That matters because background reports can contain information that requires clarification.

Pre-adverse action gives the process a checkpoint before the employment decision becomes final.

3. The Process Starts Before Adverse Action

A sound adverse-action process depends on earlier steps being handled properly.

Before obtaining a covered consumer report for employment purposes, employers generally must provide the required disclosure and obtain the individual’s written authorization. The employer also provides required certifications to the CRA concerning its use of the report.

So the broader workflow looks like this:

Disclosure and authorization → Background report ordered → CRA completes report → Employer reviews report → Potential adverse decision → Pre-adverse action → Opportunity for review/dispute → Final employer decision → Final adverse action, if taken

The adverse-action process should therefore be viewed as part of the larger background-screening workflow rather than as an isolated notice sent at the end.

Source: 15 U.S.C. § 1681b — Permissible purposes and employment conditions

4. When Should Pre-Adverse Action Begin?

Pre-adverse action becomes relevant when an employer is considering an unfavorable employment decision based in whole or in part on information contained in a consumer report.

The decision should not already be irrevocably final. The purpose of providing the report before adverse action is to give the individual a meaningful opportunity to review the information before the employer acts.

Internal Review

The employer receives a background report and determines whether something requires additional consideration. That alone is not necessarily adverse action.

Preliminary Adverse Decision

The employer determines that report information may cause an unfavorable employment decision. This is where the pre-adverse process generally becomes relevant.

Final Decision

After the pre-adverse process and appropriate opportunity for review, the employer makes the actual employment decision. The final decision belongs to the employer—not the CRA.

5. What Must Be Provided at Pre-Adverse Action?

For the ordinary federal employment process, before taking adverse action based in whole or in part on a consumer report, the employer generally must provide:

• a copy of the consumer report on which the employer is relying; and
• a written description of the consumer’s FCRA rights—the prescribed Summary of Your Rights Under the Fair Credit Reporting Act 

Employers often package these materials with what is commonly called a pre-adverse-action notice.

The Consumer Report

The person should receive the report relevant to the contemplated decision. This allows the individual to see the same information that influenced the employer’s preliminary assessment.

The Summary of Rights

The CFPB maintains the prescribed Summary of Consumer Rights in Appendix K to Regulation V. Employers and CRAs should make sure they are using a current version rather than an outdated form embedded in a workflow for years.

Source: CFPB — Appendix K to Regulation V

6. What Should a Pre-Adverse-Action Notice Say?

Federal law’s core requirement is the provision of the consumer report and the written Summary of Rights before adverse action. Many employers also send a cover notice explaining that adverse action is being considered.

That communication can help the individual understand:

• that the decision is not yet final;
• which report is being considered;
• how to review the report;
• how to contact the CRA if information is inaccurate or incomplete;
• whom to contact at the employer if appropriate; and
• what the employer’s next steps are.

The notice should not falsely imply that the CRA made the employment decision. It also should not suggest that the employment decision is already final if the employer is still in the pre-adverse stage.

Pre-adverse action: “We are considering an unfavorable decision.” Final adverse action: “We have made the unfavorable decision.”

7. The Employer Should Not Treat the CRA as the Decision-Maker

This distinction is central to professional background screening.

The CRA may locate records, verify identifiers, research dispositions, apply reporting rules, return a report, facilitate workflow, administer a client-defined adjudication matrix, or route a report for employer review.

But the employment decision belongs to the employer.

The final adverse-action notice specifically informs the individual that the CRA did not make the decision and cannot provide the specific reasons for it.

The employer—not the background screening company—makes the employment decision.

8. How Long Must an Employer Wait After Pre-Adverse Action?

This is one of the most frequently misunderstood parts of the process.

There is no universal federal FCRA provision requiring every employer to wait exactly five business days after sending pre-adverse materials before taking final adverse action.

The federal statutory framework requires the pre-adverse materials to be provided before adverse action so the individual has an opportunity to review the report.

Why Do People Frequently Hear “Five Business Days”?

Some organizations use five business days as an internal practice, and particular state or local laws may establish more specific timing requirements.

But employers should not describe a particular internal waiting period as though it were universally written into the federal FCRA.

The better question is: Does our process provide a meaningful opportunity to review and respond, and does it comply with every applicable state and local requirement?

9. What If the Applicant Says the Report Is Wrong?

This is precisely one of the reasons the pre-adverse process exists.

The applicant may say, for example:

• “That criminal case is not mine.”
• “The case was dismissed.”
• “That record was expunged.”
• “You have the wrong date.”
• “My degree was verified by the university.”
• “My former employer gave the wrong employment dates.”
• “The report contains the same offense twice.”

The individual has FCRA rights to dispute inaccurate or incomplete information with the CRA. The CRA generally must conduct a reasonable reinvestigation when a consumer disputes the completeness or accuracy of information in the file.

That distinction matters: the consumer disputes the report with the CRA; the employer manages the employment decision.

The employer should not attempt to become the CRA and conduct its own FCRA reinvestigation of the consumer-report file.

Source: 15 U.S.C. § 1681i — Procedure in case of disputed accuracy

10. What Happens While a Dispute Is Pending?

The FCRA’s reinvestigation provisions generally give the CRA a 30-day period for a consumer dispute, subject to statutory details and possible extensions in specified circumstances. The employment adverse-action provisions, however, do not simply say that every employer must always wait for the entire statutory reinvestigation period before making any decision.

This is an area where employers should be particularly careful. A practical policy should address questions such as:

• Does the employer place the employment decision on hold?
• Has the applicant identified a material factual error?
• Is the disputed information actually relevant to the contemplated decision?
• Has the CRA issued an updated report?
• Are state or local laws more specific?
• Does a fair-chance law require additional review or timing?
• What does the employer’s legal counsel recommend?

Many employers create an escalation path for material disputes rather than allowing recruiters to improvise case by case.

11. What Is Final Adverse Action?

Final adverse action occurs after the employer has completed its decision process and actually takes the unfavorable employment action.

The FCRA requires notice when adverse action is based in whole or in part on information contained in a consumer report. FTC guidance states that the notice must include:

• the name, address and telephone number of the CRA that supplied the report;
• a statement that the CRA did not make the adverse decision and cannot provide the specific reasons for it;
• notice of the consumer’s right to dispute the accuracy or completeness of information furnished by the CRA; and
• notice of the right to obtain an additional free copy of the report from the CRA if requested within 60 days.

This is a second communication. The pre-adverse package and final adverse-action notice serve different functions and should not be collapsed into one step.

Source: 15 U.S.C. § 1681m — Requirements on users of consumer reports

12. Pre-Adverse Action and Final Adverse Action Compared

13. What Does Final Adverse Action Not Require Under the Federal FCRA?

It is also useful to understand what the federal FCRA adverse-action notice is not.

The CRA does not provide the applicant with the employer’s particular business reason for the employment decision. In fact, the notice tells the person that the CRA did not make the decision and cannot provide the specific reason.

Separate state, local, contractual or employment-law requirements may require additional information in particular situations. That is another reason employers should not treat a federal FCRA template as automatically satisfying every jurisdiction.

14. State and Local Fair-Chance Laws Can Change the Workflow

Federal FCRA compliance is the baseline—not necessarily the entire adverse-action process.

State and local fair-chance or ban-the-box laws may add requirements concerning:

• when a criminal background check may occur;
• whether a conditional offer is required first;
• which criminal records may be considered;
• individualized assessment;
• specific factors the employer must evaluate;
• additional pre-adverse notices;
• specific waiting periods;
• an applicant’s opportunity to provide mitigating information;
• required forms;
• written reasons for the decision; and
• recordkeeping.

This is why multi-state employers should avoid configuring one automated national adverse-action workflow and assuming it is legally sufficient everywhere.

15. EEOC Considerations Are Separate From FCRA Adverse Action

The FCRA governs consumer reporting. Title VII and other employment-discrimination laws address different questions.

An employer can theoretically follow the FCRA’s adverse-action process correctly while still having a criminal-history policy that creates a separate employment-discrimination issue.

EEOC guidance discusses the use of arrest and conviction records, including disparate treatment, disparate impact, job relatedness and business necessity. It also distinguishes an arrest from a conviction.

Employers need to ask two separate questions: Did we handle the consumer report correctly? Are we using the underlying information appropriately in the employment decision?

Source: EEOC — Consideration of Arrest and Conviction Records in Employment Decisions

16. Adverse Action Can Apply to Existing Employees Too

The FCRA’s definition of employment purposes includes evaluation for employment, promotion, reassignment and retention.

That becomes increasingly important as employers use post-hire background checks, ongoing criminal monitoring, MVR monitoring, professional-license monitoring, periodic re-screening, third-party worker-risk scores or other employment consumer reports.

So an adverse-action program should not be designed only around applicants. Employers should consider how it applies to current employees, promotion decisions, reassignment decisions, retention decisions and relevant ongoing-monitoring programs.

17. Special Rules Can Apply to Certain Transportation Applicants

There is a narrow federal exception employers should know exists.

For certain transportation positions regulated by the U.S. Department of Transportation or a state transportation agency, where the applicant’s only interaction with the employer has been by mail, telephone, computer or similar means, the FCRA provides an alternative notice process.

Under that specific provision, different timing and notice rules can apply, including notice within three business days after adverse action in qualifying circumstances.

This is not a general exception for all drivers or all remote applicants. Employers with DOT-regulated hiring should make sure their legal and screening procedures account for the precise statutory requirements rather than assuming the ordinary adverse-action workflow always applies unchanged.

Source: 15 U.S.C. § 1681b — Transportation employment exception

18. The CRA Can Facilitate Adverse Action—but the Employer Retains Responsibility

Modern background-screening systems frequently include adverse-action functionality. The platform may generate notices, attach the consumer report, attach the Summary of Rights, send electronic communications, track status, record dates, trigger follow-up notices and preserve an audit trail.

Those tools can greatly improve consistency. But the employer remains the user of the consumer report and the decision-maker.

A software workflow should therefore be viewed as a compliance-support tool rather than a transfer of the employer’s legal responsibility to the CRA.

Employers should understand exactly:

• what the CRA sends;
• what the employer sends;
• when each communication is triggered;
• which state-specific rules the system supports;
• who handles applicant questions;
• who handles disputes; and
• who has authority to make the final decision.

19. Common Adverse-Action Mistakes

Making the Decision Before Pre-Adverse Action

The employer sends a “pre-adverse” notice after the hiring decision is already final. That undermines the purpose of the two-stage process.

Combining Pre-Adverse and Final Adverse Action

The employer effectively sends both notices at once. The applicant has no meaningful opportunity to review the report before the final decision.

Treating Five Days as a Universal Federal Rule

A particular internal policy is presented as though it were written into the FCRA. It is not. State or local timing rules may also differ.

Sending an Outdated Summary of Rights

The employer’s automated system contains an old version of the CFPB form. Employers should use the current model form.

Telling the Applicant the CRA Rejected Them

The CRA did not make the employment decision.

Ignoring State or Local Requirements

The employer follows the federal FCRA process but misses a jurisdiction-specific fair-chance requirement.

Failing to Escalate a Material Dispute

A recruiter learns that a potentially decisive record may be incorrect but proceeds mechanically without following the employer’s dispute/escalation process.

Poor Documentation

The employer cannot later establish when the report was received, when pre-adverse materials were furnished, which report was relied upon, whether an applicant responded, who made the decision or when the final notice was sent.

20. A Practical Employer Adverse-Action Workflow

Step 1 — Report Completion

The CRA completes the background report and returns it through the screening platform or ATS.

Step 2 — Employer Review

An authorized employer representative reviews the report against the employer’s documented screening criteria.

Step 3 — Preliminary Decision

If report information may result in an unfavorable employment action, the matter enters the pre-adverse process.

Step 4 — Pre-Adverse Materials

The individual receives the consumer report being relied upon and the current Summary of Rights. The employer may also include a clear explanatory notice.

Step 5 — Review Opportunity

The employer follows its established waiting and review process, including applicable state/local requirements.

Step 6 — Applicant Response

If the individual raises a concern, the issue is routed appropriately. A factual dispute about the consumer report generally goes to the CRA for reinvestigation.

Step 7 — Updated Information

The employer reviews any corrected report, explanation or relevant information before completing the employment decision where appropriate.

Step 8 — Final Employer Decision

The employer—not the CRA—makes the decision.

Step 9 — Final Adverse Action

If the employer takes adverse action based in whole or in part on the consumer report, the required final notice is furnished.

Step 10 — Recordkeeping

The organization preserves appropriate records of the process under its record-retention policies and applicable law.

21. Employer Adverse-Action Checklist

Before Screening

• Is there a permissible employment purpose?
• Was the required disclosure provided?
• Was written authorization obtained?
• Has the employer provided the required certifications to the CRA?
• Are applicable state and local laws accounted for?

Before Pre-Adverse Action

• Is consumer-report information contributing to the contemplated unfavorable decision?
• Is the report associated with the correct applicant or employee?
• Has an authorized employer representative reviewed it?
• Does the decision comply with the employer’s screening policy?
• Are any jurisdiction-specific assessments required?

Pre-Adverse Package

• Copy of the consumer report
• Current Summary of Rights
• Appropriate explanatory notice, if used
• CRA contact information where appropriate
• Instructions for questions or disputes
• Correct jurisdiction-specific materials

During the Review Period

• Has the individual been given a meaningful opportunity to respond?
• Is a dispute pending?
• Did the CRA issue an updated report?
• Does a state/local law establish a specific period?
• Has mitigating or explanatory information been submitted?
• Does the matter require HR, compliance or legal escalation?

Before Final Adverse Action

• Has the review process been completed?
• Has any updated report been considered?
• Has the employer—not the CRA—made the final decision?
• Have applicable state/local requirements been satisfied?

Final Notice

• Notice that adverse action was taken
• CRA name
• CRA address
• CRA telephone number
• Statement that the CRA did not make the decision
• Notice of dispute rights
• Notice of right to an additional free report within the applicable 60-day period
• Any additional jurisdiction-specific information

22. Frequently Asked Questions

What is pre-adverse action?

Pre-adverse action is the process that generally occurs before an employer finalizes an unfavorable employment decision based in whole or in part on a consumer report. The employer provides the person with a copy of the report and the prescribed Summary of Rights so the person can review the information first.

Is pre-adverse action the same as rejecting the applicant?

No. The point of pre-adverse action is that the decision is not yet final.

Does the FCRA require employers to wait five business days?

The federal FCRA does not prescribe one universal five-business-day waiting period for every employer. Employers should provide a meaningful opportunity to review and respond and comply with any more specific state or local rules.

What if the applicant disputes the background report?

The applicant can dispute inaccurate or incomplete information with the CRA. The CRA has reinvestigation responsibilities under the FCRA. Employers should have an established procedure for handling employment decisions while material disputes are being reviewed.

Does the employer or the CRA make the hiring decision?

The employer makes the employment decision. The final adverse-action notice specifically explains that the CRA did not make the decision.

Does adverse action apply only to applicants?

No. FCRA employment purposes include employment, promotion, reassignment and retention, so covered consumer reports used for decisions involving existing employees can also implicate adverse-action requirements.

Can the final adverse-action notice be electronic?

Federal law permits adverse-action notice to be oral, written or electronic. Employers should also account for any applicable electronic-delivery and state/local requirements when designing their workflow.

Does pre-adverse action apply to ordinary tenant screening?

Employment has a specific pre-adverse process under § 1681b(b)(3). Ordinary housing adverse action under the FCRA follows a different federal workflow.

23. The Central Principle

Pre-adverse action should not be treated merely as another automated form in the hiring workflow. It serves an important purpose.

A professional background screening system should allow an employer to evaluate legitimate information while also creating a meaningful opportunity to identify mistakes before those mistakes affect someone’s employment.

That serves both sides. The applicant receives an opportunity to review consequential information. The employer receives another opportunity to avoid making a decision based on an inaccurate report. And the CRA has an established mechanism through which disputed consumer-report information can be investigated.

Clear employer policy + accurate consumer reporting + reliable technology + meaningful review + appropriate dispute handling + documented final decision-making

The process should not be designed merely to complete adverse action faster. It should be designed to complete it correctly.

Related Resources

Background Screening for Employers

The broader employer guide covering FCRA responsibilities, screening design, report review and provider oversight.

A Guide to Professional Background Screening

The cornerstone resource covering screening technology, data sources, provider models and screening process.

Background Check Disputes: A Guide for Employers and Consumers

A deeper explanation of dispute rights, CRA reinvestigation and corrected reports.

Fair-Chance and Ban-the-Box Laws

A separate guide to state and local requirements that can modify the federal workflow.

Source Review

Last source reviewed: September 22, 2026

Primary references include the Fair Credit Reporting Act, FTC employer guidance, CFPB Regulation V and the current SimpliVerified legally source-verified cornerstone guide.

This guide is provided for general educational purposes and is not legal advice. Federal, state and local requirements may change and can vary by jurisdiction and circumstances. Employers should work with qualified legal counsel when designing or applying adverse-action procedures.