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In this video, consumer protection attorney Bill Clanton discusses adverse action letters. These letters are issued when a credit report leads to the denial of credit or other opportunities. The purpose of an adverse action letter is to inform the consumer that they were denied and to provide the reasons for this denial. This information is crucial as it allows consumers to review their credit reports, identify potential errors, and address them. Adverse action letters are mandatory when a creditor denies a loan, and they are commonly received after applications for car loans are rejected.