ever been billed for merchandise you returned or never received? Has your
credit card company ever charged you twice for the same item or failed to
credit a payment to your account? While frustrating, these errors can be
corrected. It takes a little patience and knowledge of the dispute
settlement procedures provided by the Fair Credit Billing Act (FCBA).
The law applies to "open end" credit
accounts, such as credit cards, revolving charge accounts - such as
department store accounts - and overdraft checking accounts. It does not
cover installment contracts - loans or extensions of credit you repay on a
fixed schedule. Consumers often buy cars, furniture and major appliances
on an installment basis, and repay personal loans in installments as well.
What types of disputes are covered?
The FCBA settlement
procedures apply only to disputes about "billing errors." For example:
- unauthorized charges. Federal law
limits your responsibility for unauthorized charges to $50;
- charges that list the wrong date or
- charges for goods and services you
didn't accept or weren't delivered as agreed;
- math errors;
- failure to post payments and other
credits, such as returns;
- failure to send bills to your current
address - provided you supply a change of address at least 20 days
before the billing period ends; and
- charges for which you ask for an
explanation, or written proof of purchase along with a claimed error or
request for clarification.
To take advantage of the law's consumer
protections, you must:
- write to the creditor at the address
given for "billing inquiries," not the address for sending your
payments, and include your name, address, account number and a
description of the billing error.
- send your letter so that it reaches the
creditor within 60 days after the first bill containing the error was
mailed to you.
Send your letter by certified mail, return
receipt requested, so you have proof of what the creditor received.
Include copies (not originals) of sales slips or other documents that
support your position. Keep a copy of your dispute letter.
Your City, State, Zip Code
Your Account Number
Name of Creditor
City, State, Zip Code
Dear Sir or Madam: I am writing to
dispute a billing error in the amount of $______on my account. The
amount is inaccurate because (describe the problem). I am requesting
that the error be corrected, that any finance and other charges
related to the disputed amount be credited as well, and that I
receive an accurate statement.
Enclosed are copies of (use this
sentence to describe any enclosed information, such as sales slips,
payment records) supporting my position. Please investigate this
matter and correct the billing error as soon as possible.
Your name Enclosures: (List what you
The creditor must acknowledge your
complaint in writing within 30 days after receiving it, unless the problem
has been resolved. The creditor must resolve the dis- pute within two
billing cycles (but not more than 90 days) after receiving your letter.
What happens while my bill is in
You may withhold
payment on the disputed amount (and related charges), during the
investigation. You must pay any part of the bill not in question,
including finance charges on the undisputed amount.
The creditor may not take any legal or
other action to collect the disputed amount and related charges (including
finance charges) during the investigation. While your account cannot be
closed or restricted, the disputed amount may be applied against your
Will my credit rating be affected?
The creditor may not
threaten your credit rating or report you as delinquent while your bill is
in dispute. However, the creditor may report that you are challenging your
bill. In addition, the Equal Credit Opportunity Act prohibits creditors
from discriminating against credit applicants who exercise their rights,
in good faith, under the FCBA. Simply put, you cannot be denied credit
simply because you've disputed a bill.
...the bill is incorrect?
If your bill contains an
error, the creditor must explain to you - in writing - the corrections
that will be made to your account. In addition to crediting your account,
the creditor must remove all finance charges, late fees or other charges
related to the error.
If the creditor determines that you owe a
portion of the disputed amount, you must get a written explanation. You
may request copies of documents proving you owe the money.
...the bill is correct?
If the creditor's
investigation determines the bill is correct, you must be told promptly
and in writing how much you owe and why. You may ask for copies of
relevant documents. At this point, you'll owe the disputed amount, plus
any finance charges that accumulated while the amount was in dispute. You
also may have to pay the minimum amount you missed paying because of the
If you disagree with the results of the
investigation, you may write to the creditor, but you must act within 10
days after receiving the explanation, and you may indicate that you refuse
to pay the disputed amount. At this point, the creditor may begin
collection procedures. However, if the creditor reports you to a credit
bureau as delinquent, the report also must state that you don't think you
owe the money. The creditor must tell you who gets these reports.
If the creditor fails to follow the
who fails to follow the settlement procedure may not collect the amount in
dispute, or any related finance charges, up to $50, even if the bill turns
out to be correct. For example, if a creditor acknowledges your complaint
in 45 days - 15 days too late - or takes more than two billing cycles to
resolve a dispute, the penalty applies. The penalty also applies if a
creditor threatens to report - or improperly reports - your failure to pay
to anyone during the dispute period.
An important caveat
Disputes about the quality
of goods and services are not "billing errors," so the dispute procedure
does not apply. However, if you buy unsatisfactory goods or services with
a credit or charge card, you can take the same legal actions against the
card issuer as you can take under state law against the seller.
To take advantage of this protection
regarding the quality of goods or services, you must:
- have made the purchase (it must be for
more than $50) in your home state or within 100 miles of your current
- make a good faith effort to resolve the
dispute with the seller first.
The dollar and distance limitations don't
apply if the seller also is the card issuer - or if a special business
relationship exists between the seller and the card issuer.
Other billing rights
Businesses that offer "open
end" credit also must:
- give you a written notice when you open
a new account - and at certain other times - that describes your right
to dispute billing errors;
- provide a statement for each billing
period in which you owe - or they owe you - more than one dollar;
- send your bill at least 14 days before
the payment is due - if you have a period within which to pay the bill
without incurring additional charges;
- credit all payments to your account on
the date they're received, unless no extra charges would result if they
failed to do so. Creditors are permitted to set some reasonable rules
for making payments, say setting a reasonable deadline for payment to be
received to be credited on the same date; and
- promptly credit or refund overpayments
and other amounts owed to your account. This applies to instances where
your account is owed more than one dollar. Your account must be credited
promptly with the amount owed. If you prefer a refund, it must be sent
within seven business days after the creditor receives your written
request. The creditor must also make a good faith effort to refund a
credit balance that has remained on your account for more than six
Suing the creditor
You can sue a creditor who
violates the FCBA. If you win, you may be awarded damages, plus twice the
amount of any finance charge - as long as it's between $100 and $1,000.
The court also may order the creditor to pay your attorney's fees and
If possible, hire a lawyer who is willing
to accept the amount awarded to you by the court as the entire fee for
representing you. Some lawyers may not take your case unless you agree to
pay their fee - win or lose - or add to the court-awarded amount if they
think it's too low.
Reporting FCBA violations
The Federal Trade Commission
(FTC) enforces the FCBA for most creditors except banks.