The Fair Credit Billing Act is a 1974 federal law enacted to protect consumers from unfair credit billing practices. It enables individuals to dispute unauthorized charges on their accounts and those for undelivered goods or services.
Key Benefits of the Fair Credit Billing Act
- The Fair Credit Billing Act (FCBA) provides consumers with protection against unfair billing practices.
- The FCBA applies only to open-end credit, such as credit cards and lines of credit. It does not apply to loans like auto loans or mortgages.
- Billing errors covered by the law include unauthorized charges, charges with an incorrect date or amount, and calculation errors.
- Consumers have 60 days from the time they receive their bill to dispute a charge with the card issuer or other lender.
- While the FCBA protects consumers from unfair billing practices, the Fair Credit Reporting Act (FCRA) addresses practices involving the use of a consumer’s personal information.
- A chargeback is the return of money to a customer following the successful dispute of a particular transaction.
How the Fair Credit Billing Act Empowers You
Enforced by the Federal Trade Commission, the Act covers open-end credit accounts such as credit cards, charge accounts, and lines of credit. The Act provides consumers with protection from unfair billing practices such as:
- Charges not authorized by the consumer.
- Charges with the wrong date or amount.
- Charges for goods or services that weren’t delivered.
- Charges for goods or services that were received but were not as described.
- Calculation errors.
- Charges for which the consumer needs clarification.
- Billing statements delivered to an incorrect address.
Important: During an investigation, a consumer may withhold payment only on the disputed amount, not on the rest of their bill.
Rules for Consumers
- Consumers have 60 days from the time they receive their credit card or loan bill to dispute a charge with the card issuer or other lender.
- Charges must be over $50 to be eligible for dispute.
- Complaints must be filed in writing.
- However, if a credit card was lost or stolen, consumers may dispute charges by phone rather than in writing.
- If a consumer has a dispute with a merchant, they can ask the card issuer or lender to withhold payment and request that it help resolve the dispute.
- If an unauthorized user makes purchases with a credit card, the cardholder’s liabilities are limited to $50.
- If a person is authorized to use a card but makes unauthorized purchases with it, those charges are not covered by the Fair Credit Billing Act, and the cardholder is liable for them.
- Consumers can challenge the results of the lender’s investigation within 10 days.
Rules for Card Issuers and Other Lenders
- The card issuer or other lender has 30 days to acknowledge receipt of a complaint.
- The lender has 90 days to complete an investigation, during which time it is not allowed to try to collect payment on the disputed amount, charge interest on it, or report it to credit bureaus as late. (It can, however, report it as being in dispute.)
- If the lender finds that the dispute is valid, it must correct the error and refund any fees or interest that was charged as a result.
- If the lender decides the dispute is invalid, it must explain its findings and provide documentation to the consumer.
Note: While the Fair Credit Billing Act limits a cardholder’s liability for unauthorized charges to $50, many card issuers now have voluntary zero-liability policies that reduce it to $0.
Comparing the Fair Credit Billing Act (FCBA) and the Fair Credit Reporting Act (FCRA)
Though both acts aim to protect consumers from bad credit practices, they serve different purposes.
- Fair Credit Billing Act: Protects consumers from unfair billing practices.
- Fair Credit Reporting Act: Regulates the collection and reporting of credit information about consumers.
Types of Credit Not Covered by the Fair Credit Billing Act
The act only applies to open-end credit, the kind that a consumer can borrow from repeatedly. Examples include credit cards, charge cards, and home equity lines of credit. It does not apply to closed-end credit, such as auto loans, mortgages, and home equity loans. Consumers who wish to dispute a charge involving closed-end credit are covered by other laws. For example, the Real Estate Settlement Procedures Act (RESPA) governs disputes between borrowers and their mortgage companies or loan servicers.
Understanding the Term “Account in Dispute”
Under the Fair Credit Billing Act, “account in dispute” refers to the 90-day period during which a credit issuer is investigating a consumer’s dispute. The credit issuer must either remedy the situation or send a letter to the consumer explaining why it considers the dispute invalid.
Can a Consumer Dispute a Non-Refundable Charge?
Yes, consumers have the right to dispute a transaction involving a non-refundable charge if they believe they have a valid claim, such as not receiving the product or service or not having signed or authorized the non-refundable charge.
What is a Chargeback?
A chargeback is the return of money to a customer following the successful dispute of a particular credit transaction. It reverses a money transfer from the payer’s bank account or credit card.
Will a Credit Billing Dispute Affect Your Credit Score?
Filing a dispute has no impact on a consumer’s credit score. However, the card issuer may report the dispute to one or more of the three major credit bureaus while its investigation is in progress and that information may appear in the consumer’s credit report.
Conclusion: Safeguard Your Financial Interests with the Fair Credit Billing Act
The Fair Credit Billing Act is designed to protect consumers from unfair billing practices. The act provides a path for consumers to dispute billing errors or unauthorized charges and requires that credit issuers investigate and resolve them.
Related Terms: Fair Credit Reporting Act, open-end credit, chargeback, credit bureaus, closed-end credit.
References
- Federal Trade Commission Consumer Advice. “Using Credit Cards and Disputing Charges”.
- Federal Trade Commission Protecting America’s Consumers. “Fair Credit Reporting Act”.
- Federal Trade Commission Consumer Advice. “Your Rights When Paying Your Mortgage”.
- Experian. “The Effects of Disputing Charges on a Credit Card”.
