NY Adverse Action Notice Generator

Complete Guide to Adverse Action Notices in New York

An adverse action notice is a legally-required document that landlords must provide to rental applicants when denying their application based—wholly or partially—on information obtained from a consumer report. This includes credit reports, criminal background checks, eviction history searches, and other screening reports.

What Qualifies as “Adverse Action”?

Under the Fair Credit Reporting Act (FCRA), adverse action includes any of the following decisions based on information in a consumer report:

• Denying the rental application entirely
• Requiring a co-signer or guarantor when you wouldn’t normally require one
• Offering less favorable lease terms (though in NY, security deposits are capped at one month’s rent)
• Increasing the security deposit beyond your standard amount
• Requiring additional documentation not requested from other applicants

Why This Notice is Legally Required

• Federal FCRA Compliance: The Fair Credit Reporting Act mandates that consumers be notified when information in their consumer report influences an adverse decision. Violations can result in statutory damages of $100-$1,000 per violation, plus actual damages and attorney’s fees.
• NY State Law: New York’s $20 application fee law requires landlords to provide applicants with a copy of any consumer report obtained. Charging the fee without providing the report can lead to penalties.
• Transparency & Fairness: The notice allows applicants to identify and dispute errors in their reports, protecting both tenants and landlords from decisions based on inaccurate information.
• Discrimination Defense: Proper documentation demonstrates that your decision was based on objective criteria, not protected characteristics, helping defend against potential fair housing claims.

Required Components of an Adverse Action Notice

Every adverse action notice must include the following elements to be legally compliant:

1. Notice of Adverse Action: Clear statement that you’re taking adverse action based on the consumer report
2. Screening Agency Information: Name, address, and contact information of the consumer reporting agency that provided the report
3. Agency Disclaimer: Statement that the reporting agency did not make the decision and cannot provide specific reasons for it
4. Free Report Rights: Notice that the applicant can obtain a free copy of their report from the agency within 60 days
5. Dispute Rights: Information about the applicant’s right to dispute inaccurate or incomplete information in the report
6. Contact Information: Your name/company name and how the applicant can reach you with questions

The NY Fair Chance Housing Process (Criminal Background)

If your denial is based on criminal history, New York—particularly NYC—has additional requirements:

1. Conditional Offer First: In NYC, you must make a conditional offer before running a criminal background check
2. Individualized Assessment: You cannot use blanket bans (e.g., “no felonies ever”). You must evaluate:
   • The nature and severity of the offense
   • Time elapsed since the offense
   • Evidence of rehabilitation
   • The relevance to tenancy and property safety
3. Written Explanation: Provide specific reasons for denial, not just “criminal history”
4. 5-Day Response Period: Allow applicant to provide evidence of rehabilitation, certificates of relief, or report corrections
5. Reconsideration: Review any materials submitted before making a final decision
6. Final Notice: If you still deny after review, provide final written notice with reasoning

What to Do After Sending the Notice

1. Attach the Consumer Report: Under NY law, you must provide a copy of the actual report used in your decision. Redact only information about other applicants, not information about the recipient.
2. Keep Detailed Records: Maintain copies of:
   • The application and all supporting documents
   • The consumer report obtained
   • The adverse action notice sent
   • Proof of delivery (certified mail receipt or email confirmation)
   • Any correspondence with the applicant
3. Document Your Criteria: Have written, objective screening criteria applied consistently to all applicants. This protects you from discrimination claims.
4. Respond to Disputes: If the applicant provides evidence of report errors or rehabilitation, genuinely reconsider your decision based on accurate information.
5. Refund Timeline: If you collected an application fee, you may need to refund the portion not spent on actual screening costs (NY caps fees at $20 for actual screening costs).

Criminal History: The Individualized Assessment Standard

When evaluating criminal history in New York, you must consider these factors:

• Direct Relationship Test: Is there a direct relationship between the criminal conduct and tenant responsibilities? (e.g., arson is directly relevant to housing safety; shoplifting decades ago is not)
• Time Factor: How long ago did the offense occur? Convictions from 10+ years ago generally should not disqualify applicants unless extremely serious
• Rehabilitation Evidence: Certificates of Relief from Disabilities, successful completion of programs, stable employment, positive references
• Severity vs. Nature: A single non-violent misdemeanor should weigh differently than multiple violent felonies
• Conviction Only: You generally cannot consider arrests without convictions, sealed records, or expunged convictions

Income & Employment Denials

When denying based on income or employment verification:

• Consistent Standards: Apply the same income-to-rent ratio to all applicants (typically 40x monthly rent = annual income)
• Lawful Source of Income: You MUST accept Section 8 vouchers, Social Security, disability benefits, child support, and other lawful income sources the same as employment income
• Verification Issues: If denial is based on inability to verify income (not insufficient income), state this clearly and give applicant opportunity to provide additional documentation
• Self-Employment: Don’t automatically disqualify self-employed applicants; accept tax returns, bank statements, and 1099s as verification

Credit History Considerations

Credit-based denials must be based on legitimate, consistent criteria:

• Minimum Score: If you use a minimum credit score, apply it uniformly and document it in writing
• Medical Debt: Consider excluding medical debt from your evaluation, as it often doesn’t predict tenant behavior
• Thin Files: Applicants with limited credit history (students, immigrants, young adults) shouldn’t be automatically disqualified—consider alternative verification
• Dispute Period: If applicant claims errors on their report, allow reasonable time for them to initiate dispute with credit bureaus

Record Retention Requirements

Maintain all screening-related documents for at least 3 years after the application date:

• Original application and supporting documents
• Consumer reports obtained
• Adverse action notices sent (with proof of delivery)
• Written screening criteria in effect at the time
• Notes about why this applicant was denied vs. accepted applicant
• Any applicant correspondence or dispute responses

Frequently Asked Questions

Q: Do I need to send this notice if I verbally told them they were denied?
A: Yes. Verbal notification is not sufficient. You must provide written notice that includes all required elements.

Q: Can I send the notice via email?
A: Yes, email is acceptable if you have the applicant’s email address and can prove delivery. However, certified mail provides better proof of delivery if there’s ever a dispute.

Q: What if I denied them for reasons unrelated to the consumer report?
A: If you ran a consumer report but your denial was based entirely on other factors (e.g., property no longer available, applicant withdrew), you don’t need to send an adverse action notice. However, if the report influenced your decision even partially, the notice is required.

Q: How soon must I send the notice?
A: The FCRA requires “reasonable time” which courts interpret as 5-10 business days. Sending it within 5 business days is best practice.

Q: What if the applicant disputes the information?
A: You must allow them reasonable opportunity to correct errors. If they provide evidence the report was inaccurate, reconsider your decision based on correct information. Document all interactions.

Q: Can I charge the applicant for the notice?
A: No. The cost of preparing and sending the notice is a normal business expense. You’ve already collected up to $20 for screening costs.

Additional Resources

• Federal Trade Commission (FTC): Official FCRA guidance at ftc.gov/credit
• NY Division of Human Rights: Fair housing resources at dhr.ny.gov
• NYC Commission on Human Rights: Fair Chance Housing guidance at nyc.gov/cchr
• Consumer Financial Protection Bureau: Consumer report resources at consumerfinance.gov