What is the Fair Credit Billing Act?
The Fair Credit Billing Act (FCBA), enacted in 1974, amends the Truth in Lending Act (TILA), and protects consumers from unfair credit card billing practices. The act applies to open-end accounts, like credit cards and revolving charge accounts. However, it doesn’t apply to installment-based payment contracts or debit card transactions. It’s a powerful law that empowers you to fight back against billing errors and unfair charges.
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What the Fair Credit Billing Act does
The FCBA provides a set of guidelines for consumers to dispute charges. Further, it sets clear timelines for both creditors and consumers to follow during the dispute process.
Billing errors covered under the FCBA
The FCBA empowers consumers to contest billing errors that may appear in their statements. Common errors include:
- Incorrect dates or amounts: You can dispute a statement with inaccurate dates or transaction amounts.
- Unauthorized charges: If you see a suspicious charge, it might have been made by a credit card thief. The FCBA act limits your total liability for unauthorized charges to $50. In addition, you’re not liable for charges made after you’ve reported your card as stolen.
- Math errors: Report any amounts in your bill that don’t add up correctly or if you notice an incorrect bill total after adding a tip.
- Undelivered items: You can file a billing dispute for charges on products you paid for but never received. According to the Consumer Financial Protection Bureau ® , you may be able to dispute transactions for faulty products that you’ve partially paid for under specific circumstances.
- Incorrectly addressed bills: If your credit card bill was sent to the wrong address after you’ve let your creditor know you’ve moved, you can dispute your bill. The creditor must receive your new address 20 days before the end of your billing period to dispute the bill.
- Missing statement credits: When you return a product, you should receive statement credits for that purchase. You can dispute missing credits.
- Unfamiliar charges: If you see an unfamiliar charge on your statement, ask your card issuer for proof of purchase or clarification.
Fair Credit Billing Act vs. the Fair Credit Reporting Act
The Fair Credit Billing Act and the Fair Credit Reporting Act were both created to protect consumer rights, but they aren’t the same.
As mentioned above, the Fair Credit Billing Act focuses on consumer protection with respect to unfair billing practices.
The Fair Credit Reporting Act (FCRA) helps to ensure the accuracy, fairness, and privacy of information in credit reports. This act allows you to know what information a credit bureau has about you, if the information in those files has been used against you, and what your credit score is. You can also dispute incorrect information in your credit report. In short, the FCRA involves your credit report rather than your monthly credit card statement.
Disputing billing errors under the FCBA
When you want to dispute billing errors, it’s important to follow the FCBA’s rules. As a starting point, it’s a good idea to review your statement as soon as you receive it. If you spot a billing error, here’s what to do:
- Notify the credit card company in writing of the error within 60 days of receiving your statement.
- You’ll need to write a letter explaining the error and include your name, address, account number, date, and amount of the error. You can find a sample from the Federal Trade Commission here.
- Include proof to support your claim, such as a copy of the relevant receipt.
- Send the letter to your creditor’s billing inquiries address.
Your creditor must now send you an acknowledgment of your dispute letter within 30 days. They’ll need to complete the investigation within two billing cycles. After this, you have 10 days to dispute the investigation results if they uphold the charge. If the creditor acknowledges the error, they will delete the disputed charge and remove any charges related to the error.
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If you think you’re a victim of credit card fraud, you should contact your credit card issuer right away. For Discover ® Cardmembers, you get a $0 Fraud Liability Guarantee. You’re never responsible for unauthorized purchases on your Discover Card. 2
What the FCBA means for creditors
The Fair Credit Billing Act requires creditors to follow certain rules designed to protect consumers. Creditors must:
- Acknowledge a consumer dispute letter within 30 days of receiving it.
- Not take any action that may hurt your credit until the dispute is decided.
- Promptly post payments to your account and refund overpayments (or credit them to your account).
The FCBA also makes it mandatory for creditors to meet certain billing timelines. This includes responding to dispute letters within 30 days, sending you written notices explaining your rights to dispute billing errors, and applying payments to your account the same day (if delays would lead to a finance charge like late fees).
The Fair Credit Billing Act helps safeguard credit card users from fraud, unauthorized charges, and other billing errors that may otherwise damage their credit score. It also standardizes the process for billing disputes with clearly defined timelines for creditors and consumers. As a consumer, the first step to resolving billing disputes is to monitor your credit card bill regularly in order to catch any errors quickly.
What Is the Fair Credit Billing Act?
The Fair Credit Billing Act (FCBA) is a federal law enacted in 1974 that limits consumers’ liability and protects them from unfair billing practices in several ways. It amended the Truth in Lending Act (TILA), which was enacted six years prior. The FCBA applies to open-end credit accounts, including credit cards, charge cards and home equity lines of credit, but not other types of loans.
What Does the Fair Credit Billing Act Do?
You may be familiar with some of the FCBA’s provisions, even if you didn’t realize it. The law defines what counts as a billing error, gives you the right to file disputes and creates billing-related requirements for creditors.
Gives You the Right to Dispute Billing Errors
Under the FCBA, you have the right to dispute billing errors that appear on your account statements. These could include:
- Unauthorized charges: For example, charges that occur when someone steals and uses your credit card. You aren’t responsible for charges that are made after you’ve reported the theft, and the FCBA limits your total liability to $50 for unauthorized charges. Major credit card payment networks and issuers often go even further and supersede this requirement with zero liability protections for all unauthorized charges.
- Charges with incorrect dates or amounts
- Charges for products or services that weren’t delivered as promised: For example, an item you ordered that wasn’t delivered. Some credit cards also offer a purchase protection benefit that may help if an item is lost, stolen or damaged soon after the purchase.
- Bills that are sent to the wrong address: This only applies if you’ve written to the creditor and it receives your new address at least 20 days before the end of a billing period.
- Questionable charges: You also have the right to request written proof of purchase or an explanation for a charge if you believe there’s an error.
If you file a dispute due to a billing error, you don’t have to pay the disputed amount and corresponding charges until after the investigation ends. However, you’re still responsible for the rest of your bill.
Creates Notice and Timing Requirements for Creditors
Additionally, the FCBA requires creditors to:
- Include a written notice when you open an account, and occasionally for existing accounts, that explains your rights to dispute billing errors.
- Send your bill at least 21 days before the grace period expires if your credit card has a grace period, or at least 14 days before your minimum payment is due if the account doesn’t have a grace period.
- Credit your account for overpayments and attempt to refund the overpayment if your account has a negative balance for more than six months. Creditors also must send you a refund within seven business days after receiving a written request.
- Apply payments to your account the day they’re received, unless a delay won’t lead to extra charges. Creditors can create rules and deadlines, but your payment deadline can’t be before 5 p.m. on the bill’s due date.
How to Dispute a Billing Error
If you notice a billing error and want to dispute it under the FCBA, you must write and mail a dispute letter to the creditor. You may want to send it by certified mail with a return receipt.
The letter should be mailed to a specific address for billing inquiries and must be received within 60 days of when the creditor sent the billing statement with the disputed charges. The Federal Trade Commission (FTC) has a sample letter you can use as a template. Keep copies of the letter and any additional documentation you send for your records.
Once the creditor receives your dispute, it has two billing cycles (up to 90 days maximum) to investigate and resolve the dispute. Depending on the results, you might have to pay none, part or all of the disputed amount.
If you believe your creditor isn’t abiding by the FCBA, you also have the right to sue the creditor. The FCBA allows for the court to order the creditor to pay your attorney’s fees and award you damages.
How to Dispute Other Credit Card Charges
There may be instances when you want to dispute a charge that isn’t considered a billing error under the FCBA. Or, you may choose to dispute a charge or billing error over the phone or online rather than following the FCBA’s process.
For instance, if you’re the victim of identity theft, you may want to contact the card issuer right away so it can close the account. Depending on the circumstances, you may also want to report the fraud to the FTC’s IdentityTheft.gov website.
Or, you might want to initiate a chargeback if an item you purchased arrives damaged or doesn’t match the merchant’s description. Before attempting this, however, it’s best to try to work out the issue with the merchant first.
Monitor Your Credit Report for Unusual Activity
To quickly detect unauthorized charges and billing errors, it’s key to review your billing statements each month. If you use budgeting software, you could also connect and sync your accounts, letting you quickly identify new charges throughout the month.
Monitoring your credit report is also important. With a free account from Experian, you’ll receive notifications if someone applies for or opens a new credit account in your name. You can also check your credit reports after the disputes are resolved to make sure the creditor sends an update to the credit bureaus. Sometimes this can take a couple of billing cycles, so don’t be surprised if your account’s information isn’t updated the same day.
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About the author
Louis DeNicola is freelance personal finance and credit writer who works with Fortune 500 financial services firms, FinTech startups, and non-profits to teach people about money and credit. His clients include BlueVine, Discover, LendingTree, Money Management International, U.S News and Wirecutter.
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