In 1974, Congress passed the Fair Credit Billing Act (FCBA), designed to protect consumers from unfair billing practices and limit their liability. The FCBA gives you the legal right to process anything, from a fraudulent debit or billing error to a creditor changing your billing period. This consumer protection law allows you, as the account holder, to stand up to a credit card company or home equity lender when you face an issue that could unfairly cost you money. money or affect your credit rating.
How does the Fair Credit Billing Act work?
The FCBA covers open credit accounts, such as a credit card, home equity line of credit (HELOC), or charge card. Other types of accounts, such as home or auto loans, are not covered. Here are some of the rights that FCBA grants to consumers:
Right to dispute a fraudulent debit on your billing statement
Let’s say your Discover card is stolen. You report the theft as soon as you realize the card is missing. Two weeks later, you open your credit card statement and see the debits you haven’t made. Before FCBA, it was up to you as the cardholder to prove that these debts were not yours. But since the FCBA became law, your total liability is limited to $ 50, even if the unauthorized charges were in the thousands of dollars.
Your credit card issuer can go further by imposing zero liability on unauthorized charges as a form of customer service. And the best news so far is that you don’t have to worry about fraudulent charges showing up on your credit report. It is as if the disputed charge never occurred, so your credit score is intact.
Important note: If you authorize someone to use the card and they make unauthorized charges, it is not covered by the FCBA, and you are responsible for payment.
You also have the right to object when an incorrect amount is debited from your card account. Imagine you’re at a restaurant and using your Chase Card to cover a $ 23 purchase. You open your credit card bill later and find that the charge is now $ 123. Maybe it was credit card fraud, and someone at the restaurant added one, or maybe it was just a case of human error. Whatever the reason for the change, the FCBA gives you the right to dispute the difference.
According to the FCBA, you must first make a good faith effort to resolve the problem by contacting the merchant. In this scenario, you would contact the restaurant. It is in the customer’s best interests to help you, because if the financial institution that issued the credit card gets involved, the restaurant must pay a fee to investigate the charge. Retail establishments generally find it easier (and cheaper) to help a customer fix the problem before the card issuer gets involved.
If dinner doesn’t help, it’s time to dispute the charge with Chase. The credit card company waives the fees during the dispute process, so you don’t have to pay until a decision is made. If an investigation is in your favor, the credit card company issues a chargeback, which reverses the transaction and refunds the funds to you.
If you make a purchase with your credit card and the seller does not deliver the product or service, the FCBA gives you the right to dispute the charge to your credit card.
You might not be sure about the flow, especially if it was done while you were on vacation or distracted. The FCBA grants you the right to request written proof of a purchase if you suspect that it is a mistake or even impersonation.
Establishes clear rules for creditors
Let’s face it: at one time, creditors had all the power. They make their own rules and enforce them in a way that benefits them. Due to FCBA, creditors are now required to:
- Provide written notice when you open an account (and periodically throughout the account’s retention period). This written notice should explain your right to dispute billing errors.
- If your card has a grace period, creditors must send your bill 21 days before the billing cycle grace period expires. If there is no grace period in your billing cycle, they must send your bill at least 14 days before the minimum payment is due.
- If you make an overpayment on your account, FCBA asks the creditor to charge the overpayment to your account number. If you request a refund of the overpayment, the creditor must reimburse the money.
- Creditors should post all payments to your account on the day they are received, which helps you avoid finance charges or late payment fees.
How to dispute issues
How you challenge a problem depends on the situation you are facing. For example:
To dispute a billing error:
- Within 60 days of the creditor sending the billing statement, send a dispute letter to the creditor. As a security measure, send it by registered mail with acknowledgment of receipt, in order to have proof of the date on which the creditor received the letter.
- After the creditor receives your letter, they have two billing cycles (up to a maximum of 90 days) to investigate and resolve the issue.
- If you believe your creditor is in breach of the FCBA, you have the legal right to take legal action. If the court rules in your favor, it will likely order the creditor to pay your damages and legal fees.
If you are a victim of identity theft:
If someone uses your card without your permission, contact the company that issued your credit card immediately. While sending a physical letter as a follow-up is a good idea, the most important thing is to ensure that the card account is frozen and can no longer be used without your permission.
It’s easy to imagine nothing but partisanship and infighting when you think of lawmakers. But over the years, Congress has launched powerful consumer protection tools, including the Fair Credit Billing Act. If you use consumer credit, you are doing yourself a favor when you understand your rights.