Adverse Action 2.0: How to Request Clear Explanations After an Automated Credit Denial

Why this matters now

Increasingly, lenders use automated models and complex algorithms—often called “AI”—to decide credit applications. Even when a machine makes the decision, federal law still requires a clear and specific explanation when you are denied credit or otherwise subject to an adverse action. The Consumer Financial Protection Bureau (CFPB) has emphasized that relying on a “black-box” model is not an excuse for vague notices; applicants must receive accurate, specific reasons that reflect the factors actually used.

This article explains your legal rights, the practical steps to request a meaningful explanation (including how and when to request a written statement of reasons), how to interpret machine-generated reason codes, sample request language you can use, and next steps if the lender’s response is insufficient.

Your legal rights and what creditors must disclose

Two federal rules are central:

• Equal Credit Opportunity Act (ECOA) / Regulation B: A creditor that takes adverse action must give a written statement of the specific principal reason(s) for that action, or tell you how to request such a statement. Notices must be specific and relate to the actual factors considered; vague phrases such as “internal policies” or “scored below qualifying threshold” are insufficient. The rules also specify timing for notifying applicants.
• Fair Credit Reporting Act (FCRA): If the adverse action was based in whole or in part on a consumer report or credit score, the creditor must provide additional disclosures (for example: the credit score used, the score range, date created, the CRA that supplied the score, and up to four key factors that hurt the score—or five if inquiries are a factor). Those credit‑score disclosures do not replace the ECOA/Reg B requirement to list the principal reasons for denial.

Practical timing note: under Regulation B a creditor may include a notice of your right to request the specific reasons; if you request the statement, the creditor generally must provide it within 30 days of receiving your request (and you typically must request it within 60 days of the initial adverse‑action notice). Always act promptly and save the original adverse‑action notice.

How to request a useful, legally compliant explanation (step‑by‑step)

1. Read the notice carefully. Identify whether the creditor provided a checklist reason, an "other" explanation, or a notice that tells you how to request a statement of reasons.
2. If you want the statement of reasons, request it in writing as soon as possible. Regulation B allows a consumer to request a written statement of reasons; request this within 60 days of the original adverse‑action notice to preserve your clear statutory path to a prompt written response. Cite the date of the notice and include a clear request for a statement of the principal reason(s) for the action.
3. Ask for FCRA credit‑score disclosures when relevant. If the decision was based on a consumer report or score, explicitly request the credit score disclosure (score used, score range, date, CRA, and the key factors). The FCRA score disclosure provides different but complementary details to the ECOA reasons.
4. Request model and data details if you need more than the checklist. The CFPB has said that when complex algorithms are used, consumers can be surprised by the data sources and must be told the specific factors used. Ask the creditor to identify the types of data (for example: account balances, payment velocity, purchase categories, alternative data like rental or utility reporting, public‑records inputs, or nonfinancial behavioral signals), the data sources (which CRAs or vendors), and whether any proprietary model or external vendor model was used.
5. Ask for an actionable “what‑if” (counterfactual) explanation. A useful supplement is a counterfactual-style explanation that tells you what reasonable, specific change(s) would likely change the decision (for example, “If your credit utilization were below X% or if an outstanding balance of $Y were paid off, the application would likely be approved”). Counterfactuals are not guaranteed, but they give actionable guidance. Explainable‑AI techniques—such as SHAP, LIME, and counterfactual analysis—are commonly used to produce consumer‑facing, localized explanations. If you request these, ask the creditor whether it can provide an actionable what‑if or the model’s top contributing factors for your record.

Sample request (short)

Use or adapt this text when emailing or mailing the creditor:

Subject: Request for Statement of Reasons — Adverse Action dated [DATE]

To [Creditor name]:
I received an adverse‑action notice dated [DATE] (reference [notice ID if any]). Please provide the written statement of the principal reason(s) for the adverse action under Regulation B (12 C.F.R. §1002.9). If my application was based in whole or in part on a consumer report or credit score, please also provide the credit‑score disclosure required by the FCRA (score used, score range, date, CRA/vendor, and key factors).

Additionally, please identify the data sources and the specific negative data points or behaviors relied upon, and, if available, an actionable explanation of what changes would likely result in approval (a counterfactual). Please provide these materials within 30 days. Thank you.

Sincerely,
[Your name] [Contact info]

Keep copies of everything you send and request delivery/read receipts for emails.

If the creditor’s response is vague or insufficient — next steps

If the written response just checks generic boxes or repeats boilerplate (for example, only listing a sample checklist item that does not reflect the principal reason), you have options:

• Ask for clarification and evidence. Reply asking which specific data points, vendor reports, or transactions the creditor relied on. If a consumer report or score influenced the decision, ask the creditor to identify the exact consumer reporting agency and provide a free copy of the report if you request it within 60 days of the notice (FCRA gives you a free report in connection with an adverse action).
• Dispute inaccuracies with the consumer reporting agency(ies). If you find errors on the report(s) the creditor relied on, file a dispute with the CRA that furnished the report—CRAs normally have 30 days to investigate. Keep documentation (bills, payment records, correspondence).
• File a complaint with the CFPB or your state regulator. If the creditor refuses to provide adequate reasons or you suspect unfair, discriminatory, or opaque algorithmic practices, file a complaint with the CFPB and your state attorney general or banking regulator. The CFPB has made clear it will scrutinize algorithmic denials that do not meet ECOA/Reg B requirements.
• Consider legal help for suspected discrimination. If you believe a protected class was treated unfairly or that the explanation is a disguised discriminatory practice, consult a consumer rights attorney experienced in ECOA and fair‑lending claims.

Document timelines carefully: preserve the original adverse‑action notice, date each contact, and maintain a folder for evidence.

Bottom line

Automated credit decisions do not remove your statutory rights. Under ECOA/Regulation B and the FCRA, you are entitled to the principal reasons for denial and specific score/report details when those sources were used. The CFPB has reminded creditors they must be able to deliver specific, accurate explanations even when they use complex or proprietary models. Use the sample request above, ask for counterfactual guidance if you want actionable next steps, and escalate to regulators if a lender refuses to provide meaningful information.