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In this video, consumer protection attorney Bill Clanton discusses adverse action letters, which are required when a consumer is denied credit based on their credit report. These letters inform the consumer of the denial and provide reasons for it. This information is crucial as it allows consumers to identify potential inaccuracies in their credit report and address any errors. Adverse action letters are commonly issued when individuals are turned down for loans, such as car loans. Understanding these letters empowers consumers to take corrective action regarding their credit reports.