Credit card customers have special protections under federal law in the event of billing disputes. For these protections to apply, however, consumers must follow dispute procedures and meet deadlines set by the Fair Credit Billing Act and Regulation Z.
Examples of billing errors covered by the FCBA and Reg. Z include:
- unauthorized charges
- failure to promptly post payment or other credits on the account
- charges for goods or services that were not delivered as agreed
Disputes over the quality of merchandise are not considered billing errors, but consumers may be entitled to withhold payment from the credit card issuer if the transaction was over $50 and occurred in their home state or within 100 miles of their billing address under the "claims and defenses" section of Regulation Z.
Billing Error Dispute Rules
The consumer must send a written complaint to the mailing address listed by the credit card issuer for billing error notices. This is generally different than the payment address. The complaint must provide the consumer's name and account number, describe the nature of the complaint and identify the disputed transaction by type, date, and amount. Copies of sales receipts or other supporting documentation should be enclosed. A copy of the letter should be retained by the customer. The letter must be received at the correct address within 60 days of the date the original incorrect bill was mailed. It is highly recommended that the letter be sent certified mail, return receipt requested. This will establish that the letter was received on time.
The consumer is entitled to withhold payment of the disputed amount and any related finance charges while the amount is in dispute. The credit card company may not pursue collection activities and may not report the disputed amount as delinquent to the credit bureaus. The customer is required to continue to pay the undisputed portion of the bill along with related finance charges.
The creditor must respond in writing (at least acknowledging the dispute) within 30 days of receiving the complaint. The issue must be resolved within 90 days or two billing cycles, whichever is sooner.
If the dispute is resolved in the customer's favor, then the creditor must provide a written explanation of the credits that will made to the account. The customer is entitled to a refund of the disputed amount along with any related finance charges or other fees.
If the dispute is resolved against the consumer, then the consumer must receive a written explanation of the amount owed and the reasoning behind the decision. The consumer may request copies of documentation that demonstrates the amount that is owed.
The consumer then has ten days to file a written response. The consumer may make a written refusal to pay the disputed amount. The creditor may begin collection procedures, but if the credit bureaus are notified, the creditor must note that the account is subject to a consumer dispute.
If the creditor does not follow the specified procedure, then the creditor forfeits the right to collect the disputed amount, along with up to $50 in related finance charges. It is also possible for a consumer to bring a private actions for damages. The consumer can also recover twice the amount of any finance charge - between $100 and $1,000, plus attorney fees and court costs.
Questions & Answers: Credit Cards