Even if you win a chargeback, the merchant can still sue

You should first make a good faith effort to work it out with the store

The Credit Guy columnist Todd Ossenfort
Todd Ossenfort has been chief operating officer for Pioneer Credit Counseling since 1998. He writes our weekly "The Credit Guy" column, answering reader questions about credit counseling and debt issues.

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Question

Dear Credit Guy
I ordered $3,000 countertops from a home improvement store, but the countertops were miscut. I put the charge in dispute with Discover. After many months, I won the dispute and the charges were dropped.

However, I got a letter from the store threatening me with a lawsuit over the $3,000. Can they do that? – Tim

Answer

Dear Tim,
Your letter highlights something many consumers don’t know when they file a dispute with their credit card company. This is especially true if the consumer files the dispute without trying to work with the merchant first.

The fact that you won your dispute with Discover does not mean that the $3,000 charge for the countertops just magically disappeared. The merchant did incur labor and material costs. Winning a dispute with a credit card company didn’t make those costs go away.

So, the short answer to your question is, yes, the merchant can threaten to sue. And if they move forward with a lawsuit, you are going to need an attorney. I am not an attorney and cannot give you legal advice, but you should seek one.

Billing disputes under the Fair Credit Billing Act

Your dispute with Discover falls under the auspices of the Fair Credit Billing Act, a 1974 amendment to the Truth in Lending Act.

“Charges for goods not delivered as agreed” are an example of a billing error under that act. When you filed the dispute with Discover, you won them over with your explanation that the countertops were cut incorrectly. This is likely the reason you won the dispute.

But, as you know, your complaint with the merchant is not really a billing error. Your problem is that your countertops were not correctly cut for the space.

If the merchant decides to move forward with the lawsuit, you may have to go to court, argue your case again and hope the courts will agree with Discover that you don’t owe this merchant $3,000.

The importance of talking to the merchant first

The counters were miscut, so obviously they would not work in your space. You may have to prove you did not give the merchant incorrect measurements yourself and that the merchant came out and measured the space.

Most importantly, however, the merchant might argue that you didn’t try to work with the merchant to correct the problem first. Instead, you simply filed the dispute with Discover.

The Fair Credit Billing Act requires consumers to make a “good faith attempt to obtain satisfactory resolution of a disagreement or problem relative to the transaction” from the merchant.

In your question, you didn’t mention if you tried to resolve the issue with the merchant before filing a dispute with Discover. If you did try to address the situation with the merchant first, this might play in your favor.

If you didn’t talk to the merchant first and you went ahead and filed the dispute directly with Discover, that might help to explain the merchant’s actions. But, as I said before, I don’t know if that is what happened.

If merchant takes legal action

If the merchant moves forward with a lawsuit, you must not ignore any court summons or any other correspondence. You will have to defend yourself in court. If you don’t show up, you will lose.

Hopefully, you kept good records of the transaction from beginning to end – including records of any good faith attempts to resolve the issue with the merchant first, if you did.

Your successful dispute with Discover may carry some weight if this does go to court. But, as I said earlier, you should seek legal advice.

Moving forward, this is a good reminder that the law is on your side and your credit card can help you solve a dispute with a merchant – if you do it right.

Take care of your credit!

See related: Chargebacks and how to dispute a credit card purchase, Your rights under the Fair Credit Billing Act

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Updated: 08-21-2018