Adverse action notice

Under the Equal Credit Opportunity Act and Regulation B, a creditor must notify an applicant of its decision within 30 days of a completed application. When the action is adverse, the applicant is entitled to a statement of specific reasons — or to a notice of the right to request them within 60 days. The reasons must be specific and indicate the principal ones; saying the applicant failed the creditor's internal standards or did not achieve a qualifying score is not enough.

When the decision relies in whole or in part on a consumer report, the Fair Credit Reporting Act adds its own disclosures: the credit score used and its key factors, the name and contact details of the reporting agency, a statement that the agency did not make the decision, and the right to a free copy of the report within 60 days and to dispute it. Employers who use background reports must give applicants a copy of the report before taking adverse action.

This is where model design meets the law. A model that cannot say why it declined someone cannot produce a compliant notice. Scores built from explainable signals — each decision traceable to the factors that drove it — make the notice a by-product of the decision instead of a reconstruction.