As a credit union, you will find yourself in plenty of situations where you have to write adverse action letters, such as denying clients loans or credit due to their credit report. Remember that an adverse action letter is a required part of the Fair Credit Reporting Act and the Equal Credit Opportunity Act.

Adverse action letters are typically divided into seven types, not all of which will apply to your credit union: background checks, employment, landlord/tenants, loan, mortgage, and pre-adverse. Your credit union will primarily deal with these letters related to loans, mortgages, and credit reports. That being said, all adverse action letters, regardless of type, share some qualities that allow the following advice to apply to multiple scenarios.

When writing or even looking at adverse action letter samples, start by thinking about what the recipient feels when receiving it. Recipients will be disappointed, as they did not secure that loan or line of credit they had big plans for or felt they needed. Keep this in mind as you craft the letter.

You want to convey the relevant information but avoid doing so in a way that will cause unnecessary distress to the recipient. After all, you will likely want them to still be a client at your credit union, just with products other than the one you have denied them for.

Another reason to be careful with phrasing in any adverse action letter sample is compliance. The federal law outlines a few requirements for an adverse action letter. As long as you follow the steps outlined below, you will meet these requirements and will have no compliance concerns.

How to write an adverse action letter sample step by step.

The following steps are part of any adverse action letter sample and include some key parts that you want to make sure to include in any adverse action letters your credit union sends.

Step 1: Create the header

Start your adverse action letter with the header. This includes the sender, addressee, and the date. The following is a snippet of an adverse action letter sample header:

[Credit Union Name]

[Credit Union Street Address]

[Credit Union City, State, and Zip]




[Dear Recipient’s Name]

Step 2: Create the body

You could create the main body of the adverse action letter yourself, or you could use one of the many convenient examples available. This adverse action letter sample will work well for most letters your credit union needs to send, usually with minor adjustments.

As you draft the letter’s body or customize one of the samples you find, be sure to include the following pieces of information.

Step 3: Include the credit score

The adverse action letter should include the recipient’s credit score that you used when making your decision. You will also need to include the date you checked the credit score and the range of credit scores that were possible according to your credit union’s model for generating the score.   

Step 4: Include the credit reporting agency

The letter must also include which credit reporting agency your credit union used to get the credit report, with the options being Experian, Equifax, and TransUnion. In addition to the name of the credit reporting agency, include its phone number and address.

Step 5: Include the reasons for the denial

Your adverse action letter should include the reasons that you deny the client’s application. The following are examples of reasons that you may want to include:

  •   Late payments
  •   Credit score lower than your minimum requirement
  •   High debt to income ratio
  •   Insufficient credit history
  •   High ratio of credit utilization
  •   Too many applications for credit recently
  •   Too much current credit with your credit union
  •   Collection or charge-off accounts
  •   Bankruptcy, foreclosure, or short sales

Remember that for legal compliance reasons, you must list at least four of the key reasons that negatively affected the recipient’s credit score, causing you to deny their application. In the case of any hard inquiries on the credit report that was a key factor, you must include that.

Step 6: Include notices of rights

Make sure to remind recipients of their rights in the adverse action letter. Specifically, remind them that they have the right to receive a free credit report from the credit bureau within 60 days of your letter. Include instructions on how they can get that free copy.

You should also remind recipients that they have the right to dispute the completeness and accuracy of the information that the credit reporting agency provides.

Step 7: Note that the credit bureau did not make the decision

The adverse action letter must also include a statement that the credit bureau responsible for issuing the credit report was not the party that made the adverse decision.  

Step 8: Add a personal message

At this point, you can help make the adverse action letter seem more personal or less disappointing by adding a small personal message. This personalized message can also help you retain the denied applicant as a future client.

An example would be: “It’s with great optimism that after 12 months, we can attempt to process your application again in the hope of acceptance. We truly regret the decision made and hope that you keep us in your thoughts at a later time.”

Step 9: Sign the letter

Although there is no legal requirement to include a signature in the letter, adverse action letter samples with signatures work best for credit unions. Including a signature helps maintain the feeling of personalized relationships and member attention most people associate with credit unions in comparison to banks.

After you write the adverse action letter, be sure to send it in a timely manner. After your credit union decides to deny the application, you are legally required to send the letter in a “reasonable time.” You can send it via first-class mail, e-mail, or orally.

woman on laptop while sitting on couch

Pre-adverse Action Letters

It is not a legal requirement, but you could also send a pre-adverse action letter as a courtesy to the applicant. You would send this letter before you officially make a decision but after getting the credit report. A pre-adverse action letter essentially lets applicants know that information found in their credit report may result in a denial. It provides them with an extra warning, so they have more time to prepare alternatives.

The impact of an adverse action letter sample.

Although an adverse action letter is a legal requirement, it is still helpful to look at the pros and cons.


By law, you must send an adverse action letter in specific circumstances. Therefore, sending one allows you to remain compliant.

It is also helpful for your credit union members, as the applicants know they have been denied instead of waiting for a response that will never come. Additionally, the fact that it states the reasons for the denial can help applicants improve their chances of approval in the future. The letter also benefits the denied applicant by reminding them of their rights, such as getting a credit report.

Choosing to use an adverse action letter sample instead of starting from scratch offers a high level of convenience, saving you time and helping ensure you include all the required provisions.


No matter your phrasing, applicants will be disappointed when they receive an adverse action letter. Even so, that disappointment is better than not knowing.

Adverse action letters also require a certain level of care, as you need to ensure that you meet all the requirements from the FCRA. Luckily, following the samples included here and the steps outlined above will assist with this.

Choosing to use an adverse action letter sample provides less customization compared to crafting one from scratch. Some credit unions prefer to look at various examples then combine features to draft a template they use for all adverse action letters, but this is your decision.

two staff members working together at meeting

The Takeaway

Learning to draft adverse action letters does not need to overwhelm your team, thanks to the presence of numerous samples available online.

This sample includes several variations, including one with a counteroffer included. That can be particularly helpful when your credit union wants to retain clients or sell them an alternative product if you have denied their application for one.

The most important thing to remember is that you must legally send an adverse action letter to remain compliant with the FCRA. Between the samples mentioned here and the necessary information to include, you should have no problem doing so.

For the best results in the future, try to phrase the letter in a way that will minimize the denied applicants’ disappointment, such as by encouraging them to apply again in the future when they have improved their credit score. This will help you maintain their relationship with your credit union.

Matt Boyce
Matt Boyce Head of SMB Marketing

Matt Boyce is a marketing and business professional at Podium, the premiere messaging platform that connects local businesses with their customers.

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