Have you 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, and revolving charge accounts -
such as department store 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 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 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.
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) after receiving your letter.
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Sample Dispute Letter
Date
Your Name
Your Address
Your City, State, Zip Code
Your Account Number
Name of Creditor
Billing Inquiries
Address
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.
Sincerely,
Your name
Enclosures: (List what you are enclosing.)
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What happens while my bill is in dispute?
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 credit limit.
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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.
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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 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.
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What if...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 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 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.
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What if...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. 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.
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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 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.
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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 credit or
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.
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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.
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Reporting FCBA violations
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 www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related
complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and
criminal law enforcement agencies in the U.S. and abroad.
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