Fair Credit Billing Act

The Fair Credit Billing Act is part of the federal Truth in Lending Act. FCBA establishes procedures for dispute resolution between creditors and consumers. It was designed so that you could disagree with a credit card company ad still maintain your dignity.

Essentials You Should Know:

• The Fair Credit Billing Act applies to "open end" credit accounts that include: credit cards, revolving charge accounts, and overdraft checking.
• If you find a mistake on your bill, you must send a written error notice to the creditor. It must reach the creditor within 60 days after the first bill containing the error was mailed to you.
• The creditor must acknowledge your billing error notice in writing within 30 days after it is received, unless the problem has already been resolved.
• While a bill in dispute, the creditor may not threaten to damage your credit rating or report you as delinquent to anyone.

What Types of Disputes are Covered?

The Fair Credit Billing Act settlement procedure applies only to disputes over "billing errors" on periodic statements, such as the following:

• Charges not made by you or anyone authorized to use your account.
• Charges which are incorrectly identified or for which the wrong amount or date is shown.
• Charges for goods or services you did not accept or which were not delivered as agreed.
• Computational or similar errors.
• Failure to properly reflect payments or other credits, such as returns.
• Not mailing or delivering bills to your current address (provided you give a change of address at least 20 days before the billing period ends).
• Charges for which you request an explanation or written proof of purchase.

How to Use the Settlement Procedure

You must send a separate written billing error notice to the creditor. Although a phone call might get things started you need written proof if the creditor gets grumpy. Your notice must reach the creditor within 60 days after the first bill containing the error was mailed to you. Send the notice to the address provided on the bill for billing error notices in your letter; you must include the following information.

• Your name and account number.
• A statement that you believe the bill contains a billing error and the dollar amount involved.
• The reasons why you believe there is a mistake.

It's a good idea to send it by certified mail, with a return receipt requested. That way you'll have proof of the dates of mailing and receipt. If you wish, send photocopies of sales slips or other documents, but keep the originals for your records.

What Must the Creditor Do?

The creditor must acknowledge your letter claiming a billing error in writing within 30 days after it is received, unless the problem is resolved within that period. In any case, within two billing cycles (but not more than 90 days), the creditor must conduct a reasonable investigation and either correct the mistake or explain why the bill is believed to be correct.

What Happens While a Bill Is Being Disputed?

You may withhold payment of the amount in dispute, until the dispute is resolved. You are still required to pay any part of the bill which is not disputed, including finance and other charges on undisputed amounts.
While the dispute procedure is in effect, the creditor may not take any legal or other action to collect the amount in dispute. Your account may not be closed or restricted in any way, except that the disputed amount may be applied against your credit limit.

What about your Credit Rating?

The creditor is not allowed to threaten to damage your credit rating or report you as delinquent to anyone while involved in the dispute procedure. However, the creditor is permitted to report that you are disputing your bill.

According to another federal law, the Equal Credit Opportunity Act, creditors cannot discriminate against credit applicants who, in good faith, exercise their rights, under the Fair Credit Billing Act. You cannot be denied credit merely because you have disputed a bill.

If the Creditor Makes a Mistake

If an error is found, the creditor must write you explaining what they plan to do about it. The corrections must be made to your account including, crediting your account with the amount not owed, and removing any finance charges, late fees, or other charges relating to that amount. If they determine that you owe part of the disputed amount, this must be explained in writing. You also have the right to request copies of documents proving you owe the money.

If the Bill Is Correct

If after investigation the creditor feels the charges are correct, they must notify you in writing explaining how much you owe and why. You may also ask for copies of relevant documents. At this point, you will owe the disputed amount, plus any finance charges that accumulated while it was disputed. You may also have to pay the minimum payment amount missed because of the dispute.

If You Still Disagree

You may still feel the bill is wrong. If this happens, write the creditor within 10 days after receiving the explanation and tell them you still 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, he must also state that you don't think you owe the money. Also, you must be told who receives such reports.
If the Creditor Doesn't Follow the Procedures

If a creditor doesn’t follow procedure they are denied collection of the first $50 of the amount in dispute or finance charges on it, even if the bill turns out to be correct. For example, this penalty would apply if a creditor acknowledges your complaint in 45 days (15 days too late) or takes more than two billing cycles to resolve the dispute. It also applies if a creditor threatens to report or goes ahead and improperly reports your nonpayment to anyone. You also have the right, as more fully described below, to sue a creditor for violation of the Fair Credit Billing Act.

Complaints and Quality

Disputes about the quality of goods and services are not necessarily "billing errors," so the dispute procedure may not apply. However, you still may have recourse under the Fair Credit Billing Act if you have purchase unsatisfactory goods or services with a credit card. You may be allowed to take the same legal actions against the credit card issuer as you could take under state law against the seller. Because state laws on your right to stop payment vary, it is best to get legal advice from your Legal Assistance Office before you do so. However, before you take legal action, you must give the seller a chance to remedy the problem. Also, unless the seller is also the card issuer (such as a company that issued you a gasoline credit card), you must have bought the item in your home state or within 100 miles of your current mailing address, and the amount must have been more than $50.

Other Billing Rights for Consumers

The Fair Credit Billing Act also required "open end" creditors to do the following for their customers:

• Give you a written notice when you open a new account, and at other specified times, describing your right to dispute billing errors.
• Provide a statement for each billing period in which you owe--or they owe you--more than $1.00.
• Send your bill to you at least 14 days before the payment is due, if you are given a time period within which to pay the bill without incurring additional finance or other charges.
• Credit all payments to your account as of the date they are received, unless not doing so would not result in extra charges.
• Promptly credit or refund overpayments and other amounts owed to your account.

You Can Also Sue

You can sue a creditor who violates any Fair Credit Billing Act provisions. If you win, you may be awarded damages resulting from the violation, plus twice the amount of any finance charge (but not less that $100 or more than $1,000). The court may also order the creditor to pay your attorney's fees and costs. You may consult your Legal Assistance Office for advice about such lawsuits. Be sure you get a full explanation of what it could cost before you go to court.

Where to Report FCBA Violations

The Federal Trade Commission (FTC) enforces the Fair Credit Billing Act for almost all creditors except banks. While the Commission does not represent individuals in private disputes, information from consumers as to their experiences and concerns is vital to the enforcement of the Act. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357) or write to Correspondence Branch, Federal Trade Commission, Washington, D.C. 20580.