Business charged you via card number on file? Dispute it

Speaking of Credit columnist Barry Paperno
Barry Paperno is a freelance writer and credit scoring expert with decades of consumer credit industry experience, serving as consumer affairs manager for FICO (formerly Fair Isaac Corp.) and consumer operations manager for Experian. He writes "Speaking of Credit," a weekly reader Q&A column about credit scoring and rebuilding credit, for His writings about credit scoring have appeared in The Huffington Post, MSN Money, CBS Money Watch and other consumer finance websites.

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Dear Speaking of Credit,
Can a company that has my card number from a prior transaction charge my Visa for a disputed service (16 months after the disputed service)? – Frank


Dear Frank,
Not without your permission they can’t. But are you sure you didn’t give the service provider your consent to charge the card, by way of the fine print in the purchase agreement for this disputed service or the prior transaction that was charged to your Visa card?

According to Jonathan G. Stein, consumer law attorney, there are at least a couple of scenarios where the company may have been legally allowed to charge your card:

  • “First, if you buy something online, there is generally really fine print that says ‘By placing this purchase, you agree to us charging your credit card’ or something to that extent.

  • “Second, if there were prior dealings, and it sounds like there were, there may be language in a contract, agreement or purchase order, that allows them to do this.”

Yet, whether or not the service provider truly had permission to charge your card, by doing so they may have actually helped you with your dispute via a consumer protection law called the Fair Credit Billing Act.

Passed in 1974 as an amendment to the Truth In Lending Act, the Fair Credit Billing Act (FCBA), gives consumers the right to take legal actions against the card issuer when having a problem with goods or services paid for with a credit card. For you, this means you may now be able to resolve the issue by filing a dispute with the card company, as long as:

  • The charge was for more than $50 and was made in your home state or within 100 miles of your card account billing address, and

  • You first made a good-faith effort to resolve the problem with the service provider.

To dispute this charge, the FCBA requires that, within 60 days after the charge first appears on your bill, you notify the card company by sending a letter (certified, with return receipt requested, is best), call their dispute resolution department or provide the information online. Whichever way you submit it, you’ll want to provide a clear explanation of the problem along with any documentation that can help support your claim.

Once they receive your dispute, the card issuer will notify the merchant (service provider) of your complaint and give them the opportunity to reply. At this time the card company may initially remove the charge from your account and withdraw the disputed funds from the service provider’s merchant account in the form of a “chargeback.”

Then, if the issue remains unresolved, the card company will decide which party – you or the merchant – acted most responsibly in this situation. If they find in your favor, the disputed amount will be permanently removed from your account and charged to the merchant. Otherwise, you’ll be required to pay it by your card’s next due date.

Another feature of the FCBA allows you to withhold payment to the card company in the amount of the disputed charge from the time the card company acknowledges your dispute until its resolution. During this time the card company cannot consider the disputed amount  as delinquent, assess interest or a late fee, or report it to the credit bureaus as past due.

When a dispute is pending, expect your credit report to show the account as being in dispute, though such notations carry no negative credit scoring impact.

What often makes this FCBA dispute mechanism work in a consumer’s favor is that both parties want you to be satisfied and continue to do business with them. They also have a financial incentive to minimize their time spent wading through this process. In fact, card companies have been known to penalize merchants who generate too many disputes.

If all else fails and the dispute does not go in your favor, you may have the option to take the service provider to small claims court, as long as the disputed amount falls within your state’s dollar amount threshold for small claims suits – typically between $2,500 and $10,000. The filing fees are minimal and you don’t have to be represented by a lawyer, which keeps the legal costs down.

There’s a huge potential downside to going the small claims route, however. If the decision doesn’t go in your favor, a credit score-damaging court judgment can be filed against you and remain on your credit report for seven years. And to add insult to injury, you will not be able to appeal the decision.

See related: Your rights under the Fair Credit Billing Act

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Updated: 02-22-2019