Timing Between Sending Pre-Adverse and Final Adverse Action Notices
Question: How long do we need to wait after sending an applicant a Pre-Adverse Action Notice before sending the Final Adverse Action Notice?
Response & Analysis:
While there is no time period specifically referenced in the Fair Credit Reporting Act (“FCRA”), the Fair Trade Commission (“FTC”) has provided guidance that suggests five (5) business days is the minimum time period that should elapse after sending a Pre-Adverse Action Notice before sending the Final Adverse Action Notice. In addition, the negligible existing case law that references this issue also reinforces that any less than five (5) business days would not be sufficient and that intervening holidays should be considered. What is clear from the FCRA language, FTC guidance and case law, however, is that the Pre-Adverse Action Notice must be sent before the Final Adverse Action Notice; therefore, in no event should the Pre-Adverse Action Notice and Final Adverse Action Notice be sent simultaneously.
While no specific time is provided, the FTC has issued opinion letters which provide some insight into the purpose of the provision and some guidance. According to Hawkey, FTC Staff Op. Letter (Dec. 18, 1997) and Coffey, FTC Staff Op. Letter (Feb. 11, 1998), the “clear purpose of the provision [is] to allow consumers to discuss reports with employers or otherwise respond before adverse action is taken.” In Lewis, FTC Staff Op. Letter (June 11, 1998), the FTC stated that the amount of time an employer should wait “will vary depending upon the circumstances, such as the nature of the job involved and the way that the employer does business.” In Rosen, FTC Staff Op. Letter (June 9, 1998), the FTC noted that employers must comply with this provision even if the information contained in the report would automatically disqualify the consumer from employment as “this is precisely the situation where it is important that the consumer be informed of the negative information in case the report is inaccurate or incomplete.” The applicant must have a meaningful opportunity to review the information and to dispute, if necessary. Section 611 of the FCRA further details the procedures for reinvestigating disputed information.
In addition, case law reinforces the guidance that the time between the Pre- Adverse Action Notice and the Final Adverse Action Notice should be sufficient enough for the consumer to receive a copy of the draft consumer report and correct any inaccuracy before any decision is taken on such consumer. In the case of Beverly v. Wal-mart, 2008 WL 149032 (E.D. Va. 2008), the Court found that sending the plaintiff a Pre-Adverse Action Notice and copy of his consumer report on Sept. 1, followed by an Adverse Action Notice on Sept. 6, was too soon given that the Labor Day holiday fell on Monday, Sept. 5 and mail delivery was delayed. The plaintiff, therefore, did not have a sufficient or reasonable period of time before the defendant took adverse action. In the more recent case of Johnson v. ADP Screening and Selection Services, Inc. and Robert Half International, Inc., 768 F. Supp. 2d 979 (D. Minn. 2011), the Court found against a plaintiff who argued that his disqualification ten (10) business days after he was sent a Pre- Adverse Action Notice violated the FCRA. The Court stated that the defendant’s waiting from Feb. 11 until Feb. 25 provided the plaintiff with “ample opportunity to dispute the report.”
While no time period is specifically referenced in the FCRA, given the FTC guidance and limited case law, waiting a minimum of five (5) business days after sending a Pre-Adverse Action Notice before sending the Final Adverse Action Notice is prudent. In addition, intervening holidays and other anticipated delays in mail delivery should be taken into account.
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