Fair Credit Billing Act

Ever been billed for purchases you returned or never received? Ever been charged by your credit card company twice for the same item? Has the credit card company failed to credit a payment to your account? Though bothersome, these mistakes can be corrected. Some patience and knowledge of the dispute settlement procedures provided by the Fair Credit Billing Act (FCBA can assist you with this task.

The Act applies to "open end" credit accounts, such as credit cards, revolving charge accounts (often department stores). It does not cover installment contracts, loans or extensions of credit you repay o­n a fixed schedule, normally personal or auto loans.

The FCBA settlement procedures apply o­nly to disputes about billing mistakes. For the following examples:

•  Unauthorized charges. Federal law limits your responsibility for unauthorized charges to $50;

•  Charges that list the wrong date or amount;

•  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 the creditor receives your change of address, in writing, 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 consumer law protection, you are required to:  

•  Write to the creditor at the address provided 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.

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 dispute within two billing cycles (but not more than 90 days)  

While your bill is in dispute…

You may withhold payment o­n the disputed amount (and related charges), during the period of 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 credit limit.

Affect o­n credit rating…

The creditor may not threaten your credit rating or report you as late while your bill is in dispute. However, the creditor may report that you are contesting 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. Thus, you cannot be denied credit simply because you've disputed a bill.

What if 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 resulting from 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.

If the bill is correct…

If the creditor's investigation shows that 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 dispute.

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 commence collection procedures. However, if the creditor reports you to a credit bureau as delinquent, the report also must state that:

You do not believe you owe the money. The creditor must let you know who gets these reports.

What to do when the creditor fails to follow the procedure?

Any creditor 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.   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.

Not a billing error, but another problem…

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 (more than $50) in the state where you live or within 100 miles of your current billing address;

•  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 months.

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 costs.

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 violations of the Act

The Federal Trade Commission (FTC) enforces the FCBA for most creditors except banks. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or to get free information o­n consumer issues, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ .