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The primary requirement of the Adverse Action regulation is that a formal written notice must be provided to the consumer when a credit application is denied. This regulation is rooted in the Fair Credit Reporting Act and the Equal Credit Opportunity Act, which aim to ensure transparency and fairness in lending practices.

When a lender denies a credit application, the written notice serves several important purposes. It informs the consumer of the decision, provides the reasons for the denial, and helps the individual understand their rights. Additionally, this notice often includes information about how the consumer can obtain a free copy of their credit report or how they can dispute inaccuracies in their credit report that may have contributed to the adverse decision.

This requirement is essential to promote accountability among lenders and to empower consumers by giving them insight into the decision-making process, which can enhance trust in the lending system. The emphasis on written communication ensures that consumers receive a tangible reference for their records and future actions, reinforcing the importance of informed borrowing practices.