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Consumer & Decision Models

Adverse action

A decision that negatively affects a consumer, such as denying credit or offering less favorable terms. When a model influences the decision, governance teams assess data, performance, explainability, monitoring, and compliance controls around the model's role.

Last updated: Last reviewed by: Model Risk Directory editorial team

How the term is used in model risk management

A decision that negatively affects a consumer, such as denying credit or offering less favorable terms. When a model influences the decision, governance teams assess data, performance, explainability, monitoring, and compliance controls around the model's role. The exact implementation varies by institution, model type, risk rating, and governing framework. Use the linked regulatory pages and buyer guides below for scope-specific requirements.

Related glossary terms

ExplainabilityModel biasModel documentation

Guides and frameworks that use this term

GuideModel Risk ValidationModel risk validation is the independent testing of a specific model's conceptual soundness, ongoing performance, and outcomes, performed by staff or a third-party firm genuinely separate from that model's development. It is the 'effective challenge' function required under SR 26-2 and SR 11-7, distinct from broader model risk management program design.FrameworkSR 26-2SR 26-2, issued jointly by the Federal Reserve, OCC, and FDIC on April 17, 2026, is the current US interagency guidance on model risk management. It supersedes SR 11-7 (2011) and SR 21-8 (2021), preserving core disciplines like effective challenge and independent validation while shifting to a risk-based approach tailored to an institution's model risk profile, size, and complexity.