Fair Credit Billing ActToday, consumers enjoy several protections when it comes to purchases made with their credit cards. These protections allow them to receive compensation for unauthorized charges, request that inaccuracies are removed from their billing statements and, in some cases, withhold payment when a merchant makes an error regarding their purchase. But things weren’t always this way – it wasn’t until the introduction of the Fair Credit Billing Act (FCBA) in 1974 that consumers had recourse for these types of issues. Even though this isn’t a new law, it’s still something all consumers should be aware of. As such, in this article we go in-depth about what the Fair Credit Billing Act is and what rights it provides consumers.

What is the Fair Credit Billing Act?

As stated above, the FCBA is a law that allows consumers to address issues relating to misuse of their credit card or errors in their credit card bill. Cardholders can file disputes with their credit card issuer with regard to specific charges that might be unauthorized or otherwise inaccurate. The FCBA determines exactly when consumers are entitled to disputes, as well as the rules in place for processing and resolving these disputes.

What is a dispute and when are you entitled to one?

Disputes are requests you make to your credit card provider or creditor, usually (but not always) in writing, indicating that a charge should be dropped from your bill. You’re usually eligible to request a dispute in the following circumstances:

  • When a charge was not made by you — a result of theft or fraud
  • When a charge reflects an inaccurate amount or date
  • When a charge is for goods or services you’ve failed to receive, were not delivered as agreed or were damaged on delivery
  • When a charge fails to properly reflect payments or credits associated with an account
  • When a charge is the result of a math or calculation error
  • When you want to request an explanation or proof for a specific charge, along with a claimed error or request for clarification
  • When a card issuer fails to send bills to your current address — assuming it has your change of address, in writing, at least 20 days before the billing period ends

How do you request a dispute?

There are several steps to requesting a dispute, but they tend to depend on the circumstances surrounding the issue. Here are three common instances in which you’d likely want to file a dispute:

1. If the credit card provider made a mistake. If there’s an error on your bill that is solely the fault of your card issuer or company, you should immediately send in a written dispute letter within 60 days of noticing the charge. Be sure to include your name and address, a statement and explanation of the error, the erroneous amount as well as your justification for believing why the charge is an error. The FTC provides a sample letter that serves as a good example of what you can send your credit card issuer, or any other creditor, for that matter.

2. If your credit card was stolen or used for fraudulent charges. You should simply call your credit card provider (or alert them thorough the website or mobile app, like you can with Citi and Discover) to notify them as soon as possible, and cancel the card for good measure. If you see the charges that you requested to be removed lingering on your next billing statement, you could follow up via phone or formally request the removal by sending in a written dispute. Keep in mind that certain types of fraudulent charges, like those made by family or someone who had permission to use your card, are less likely to be taken seriously or removed from your account.

3. If a merchant failed to provide a product or service you purchased. Assuming you haven’t already paid off your bill, you can technically withhold or cancel payment for a product or service exceeding $50 that was purchased within 100 miles of your mailing address (or with a store card from the merchant you made purchased from). This right is only reserved for goods and services that either weren’t received in a timely manner or were given to you in poor condition. While there’s some degree of subjectivity involved in the process (much to the chagrin of merchants), credit card providers expect you to make a good faith effort to not abuse the system and resolve the issue with the merchant first before withholding or trying to reverse authorized payments made with your card. To initialize this process, simply contact your credit card issuer after your attempts to resolve the issue with a merchant fail. Afterward, you can submit a written dispute if the charge is still on your bill at the end of your billing cycle.

What are your rights during a dispute?

The first thing you should know is that, generally, you have a 60-day window to dispute charges. There’s some leeway with certain situations, like unauthorized card use – especially any resulting from data breaches – which essentially have an indefinite disputing window, given that you may not know about it for months after. Still, in most cases, the best way to make sure you submit any necessary disputes within the two-month timeframe is to look at your statements as often as possible and report or dispute charges as soon as you notice something is amiss.

Once your card issuer receives your dispute, it has 30 days to acknowledge that it received your dispute and then it has two billing cycles to resolve the issue surrounding the dispute. While a charge is in dispute, you legally do not have to pay off the amount until the dispute is resolved. This means that your credit card provider cannot contact credit bureaus about this balance or threaten your credit scores if you don’t pay. Similarly, the disputed amount cannot accrue interest until the dispute is concluded and your credit card issuer has found the charge to be legitimate. However, any other outstanding balances, not related to the dispute, will be charged interest like they normally do.

After an investigation into your dispute …

If your dispute is successful and the creditor or card issuer finds the charge(s) in question to be erroneous, they must respond in writing that the corrections will be made to your account while waiving all interest, late fees or other charges associated with the erroneous amount. Conversely, if the amount disputed is upheld as legitimate, you must be told in writing how the creditor came to that decision. In addition, you’ll be responsible for the disputed amount, plus any interest or fees the disputed charge(s) may have accrued over the course of the investigation.

If you do not accept the conclusion of an investigation, you have the option of writing again to the creditor, but move quickly because you’ll only have 10 days to respond. If your response is received in 10 days, the creditor will be obligated to add a statement to your credit reports noting that the amount in question was in dispute. You can choose to indicate that you refuse to pay the disputed amount – although you should note that the creditor or card issuer can choose to mark the account as derogatory or take you to collections over this amount if they find it to be legitimate.

Finally, if a credit card provider or creditor is late in responding to your dispute or it takes more than two billing cycles for you to receive a response, then it is not allowed to collect any money on the disputed charge, even if it finds the charge to be legitimate. Remember that should a creditor or card issuer violate any aspect of the FCBA, you have the right to take legal action against the entity.

For more information about the rights that credit cardholders have, keep reading our personal finance blog.