Your rights under the Fair Credit Billing Act
The law protects you from paying for unsatisfactory, fraudulent purchases
If you've been charged for a product or a service by mistake or were overcharged on a recent purchase on your credit card, a decades-old law called the Fair Credit Billing Act can step in to help.
The FCBA allows cardholders to dispute incorrect charges and temporarily withhold payment -- without hurting their credit scores. The law also forces card issuers to investigate any disputed charges and fix them if they're wrong.
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"Mistakes happen," says Matt Buckalew, an attorney at Looney and Conrad in Houston. Don't assume the charges listed on your credit card statement are automatically correct. "Consumers really need to go over their billing statements with a fine-tooth comb," he says.
To protect consumers against inaccurate or unwarranted charges, the FCBA was enacted in 1974 as an amendment to the Truth in Lending Act. Before the Fair Credit Billing Act, consumers' credit ratings were at risk for nonpayment or late payment hits if they withheld payment for charges that were inaccurate.
Cardholders are also protected from liability for fraudulent charges under the FCBA if their credit card details have been compromised in a data breach or if they discover a thief has gained access to their card details. "I know people have been really concerned about these data breaches with merchants such as Target and Home Depot," says Chi Chi Wu, a staff attorney with the National Consumer Law Center in Boston. "If what's stolen are credit card numbers, consumers should feel fairly confident that their rights are protected," says Wu.
Don't wait to notify your issuer if you catch an unauthorized charge or an error on your statement, however. "If you just sit back and do nothing, the law doesn't protect you," says John Ulzheimer, president of consumer education at CreditSesame.com. "You have to notify your card-issuing bank that you see transactions on the card you don't recognize. When you do that and formally challenge the validity of the billing, that's when your protections kick in."
Here are seven things you need to know about the Fair Credit Billing Act and how to use it to protect your consumer rights.
1. You have 60 days to dispute a
If you catch a billing error on your card statement, you have the right to dispute the charge with your card issuer, but you have to act quickly. Under the Fair Credit Billing Act, you have 60 days after the bill was mailed to you to report the incorrect charge.
If you miss the two-month window, a bank may still honor your request but you forfeit your right to a legally protected dispute, says Wu.
Tip: To make sure your rights are protected, carefully monitor your statements, says Thomas Nitzsche of ClearPoint Credit Counseling Solutions. "There are a lot of people who don't check their statements closely. They just assume the bill is right," he says. That can backfire if you later find a charge you need to dispute. For example, Nitzsche didn't find out about a recurring charge on his statement until 11 months had passed. "I was able to dispute it, but they would only honor the past two or three months as far as crediting me back."
When you ... formally challenge the validity of the billing, that's when your protections kick in.
|-- John Ulzheimer
The Ulzheimer Group
2. You must mail in your dispute.
Once you find a billing error, mail your complaint directly to the card issuer. "Calling isn't enough," says Wu. If you're disputing a charge that was made in error, such as a math error on your billing statement, "it's very important that it be in writing."
Make sure you include in your letter your name and account number, the dollar amount you are disputing and why you think you were charged by mistake. If you need a template for your letter, check out the Federal Trade Commission's sample dispute letter.
Send the letter by certified mail and include documentation if you have it, says Kevin Weeks of the Financial Counseling Association of America. "It makes it a heck of a lot easier if you have a receipt that says $50, but somehow they charged you $500," says Weeks.
Don't worry, though, if you forgot to save proof of what you purchased. You aren't obligated to send supporting documentation, says Wu. "If there was no receipt, [the card issuer] can't say, 'Oh, we're going to rule against you.'" But it might have a harder time investigating your claim. "If you don't have a receipt, the outcome might not be what you want," she says.
Tip: Be careful about the types of errors you try to dispute. The Fair Credit Billing Act has a fairly broad definition for what counts as a billing error. For example, if a merchant charges you for a shipment, but you don't receive it, that counts as a billing error. It also counts if the merchant sends you a different product than what you ordered or if the merchant fails to perform the services it promised. However, you can't dispute a charge under the act if you're simply unhappy with the product or the service you received. "If the service was horrible, that's different," says Ulzheimer. "That's not challenging the validity of a charge. That's challenging the quality of the service."
3. It will take a few months for
your issuer to complete its investigation.
Once your card issuer receives your dispute, it has 30 days to acknowledge that it received notice of a billing error and inform you that it's investigating your complaint, says Nessa Feddis, a senior vice president at the American Bankers Association. "Then they have to resolve it within two complete billing cycles," she says.
While the charge is being investigated, your issuer is not allowed to report the disputed charge as a late payment to the credit bureaus, nor can it try to collect payment on the disputed portion of the bill or charge you interest on it.
Tip: You don't have to pay the disputed amount while your complaint is being investigated, but you do still have to pay the rest of the bill if there are other charges listed. "You'd be surprised by how many people are like, 'Until you correct that charge, I'm not paying anything,'" says Ulzheimer. "The act does not give you that right," he says. "You can't hide behind the act when your statement comes. If you don't pay it, you're going to be late."
4. You can challenge the issuer's
investigation if you disagree with its findings.
If the card issuer investigates your dispute and finds that you were indeed billed by mistake, "It must correct the billing error and deliver a correction notice," says Feddis. Any related finance charges or late payment fees must also be erased from future statements.
You have to make a good faith effort to solve the problem with the merchant directly,
Chi Chi Wu
National Consumer Law Center
If the issuer determines you were charged correctly, it can resume collecting the debt. However, it has to provide you with a written explanation of its findings, says Feddis.
If you disagree with the issuer's findings, you can challenge its investigation within 10 days of receiving a written explanation. That will force the card issuer to add a note to your credit report explaining that the charge is still in dispute if you decide not to pay that portion of your bill. The note may not help you much if the debt is sent to collections. It's "largely cosmetic," says Ulzheimer. "It just lets [other lenders] know that, hey, there's a charge here that's being challenged under the Fair Credit Billing Act so it may not be valid."
Tip: If you're suspicious of the thoroughness of your card issuer's investigation and don't agree with its results, you can also ask your issuer for the proof it used to reject your claim.
5. Lost, stolen or unauthorized
use? Call, don't write.
You're granted much more leeway with a dispute if your card is lost or stolen or if your card details are lifted in a data breach. For example, if your personal details are stolen, you don't have to send the dispute by mail. "Unauthorized use does not require you to dispute the charge in writing," says Wu. "You can do it over the phone."
You also have more than 60 days to notify the card issuer if you're disputing unauthorized charges, says Wu. "Obviously, if you're aware of unauthorized use, you should do it as soon as possible." But if you don't find out about a data breach until months after it occurred, your rights are still protected.
Under the FCBA, you're only liable for a maximum of $50 if a stranger misuses your card. "The reality," however, "is you probably don't have to pay anything if you establish it's unauthorized use," says Wu. "Visa and MasterCard often waive that $50."
If your card details are used fraudulently online or over the phone, you also aren't liable for those charges, she adds. "If it's the case where the credit card thief uses the number [but not the actual physical card], they can't even charge you the $50."
Tip: If you authorize someone to use your card, you can't challenge what that person bought under the Fair Credit Billing Act. For example, if you give your girlfriend your card to buy groceries and instead she buys $400 in clothes, that doesn't count as an unauthorized charge. "If you give somebody your card or your number, you basically authorized them to use it," says Feddis.
6. Dissatisfied with a credit
card purchase? You can temporarily withhold payment.
If you're unhappy with a purchase and have a justifiable complaint about its quality, the act also grants you the right to delay paying that specific charge on your credit card bill until your complaint is resolved. However, you can't invoke this right until you've gone to the merchant first, says Wu, so move fast.
"You have to make a good faith effort to solve the problem with the merchant directly," she says. Contact the merchant as soon as you have a legitimate complaint about a good or service. If the merchant refuses to work with you, then "you can raise the complaint with the credit card company." To do so, tell your credit card company that you've been unable to resolve the problem with the merchant and are invoking your right to "withhold payment" on that purchase.
Once you complain to your issuer and ask them to charge back the purchase, the issuer must refrain from reporting the delinquent payment to the credit bureaus until your dispute with the merchant is resolved.
Your issuer might also decide to investigate the complaint on your behalf, but it's not obligated to settle the issue for you, says Feddis. "They can be the broker," she says. "If there's insufficient evidence, then they step out of it."
To take advantage of this protection, your purchase must cost more than $50 and you have to have bought the product or service in your home state or within 100 miles of your mailing address -- unless you purchased the product or service using a store card from the merchant. In that case, it doesn't matter how much the purchase cost, nor does it matter where you live. Your purchases are still protected.
"Internet purchases are a little tricky," says Wu. The right to withhold payment for Web purchases depends on state law. If your home state doesn't recognize this right, you may be out of luck.
Tip: Don't pay off your credit card bill until you've examined all the charges. You can't ask for a refund under this provision if you've already paid your credit card bill in full, says Wu. "If you've paid the amount that's being disputed, then you can't withhold payment."
7. Contact a lawyer if you feel
your rights are being ignored.
If you think your card issuer has violated the Fair Credit Billing Act, you can file a complaint about your credit card company with the Consumer Financial Protection Bureau or the Federal Trade Commission.
You may also want to reach out to a consumer lawyer experienced in handling Fair Credit Billing Act cases if you still need help getting the problem resolved.
Tip: You can find a consumer lawyer in your region by visiting the National Association of Consumer Advocates website and clicking "Find an Attorney."
Published: June 5, 2015
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