Which action does not require an adverse action notice?

An adverse action notice is a requirement under the Equal Credit Opportunity Act (ECOA) and the Fair Credit Reporting Act (FCRA) that must be provided when a lender takes an adverse action against a borrower, such as denying a loan application or reducing the amount of credit extended.

A favorable change in account terms does not require an adverse action notice because it is an action that benefits the borrower. For instance, if a lender decides to lower interest rates or increase the credit limit on an account in a positive manner, this is not something that negatively affects the consumer’s access to credit. Consequently, providing a notice would be inappropriate since the change is advantageous.

In contrast, other options such as a refusal to grant an increase in limit, a decline of a loan application, or an unfavorable change in interest rates do constitute adverse actions. These decisions can negatively impact the borrower’s credit situation or their ability to obtain financing, hence they necessitate an adverse action notice to inform the borrower of the decision and the reasons behind it.