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Your Legal Right to Disputes

Perhaps the most important credit card benefit is your protection against unauthorized and fraudulent purchases.

The Fair Credit Billing Act (FCBA) is a United States federal law with its purpose to protect consumers from unfair billing practices and to provide a mechanism for addressing billing errors in "open end" credit accounts, such as credit card or charge card accounts.

There are three separate protections for credit card consumers. Each of these protections are intended to require the credit card lender to follow certain procedures when you have a problem with a credit card transaction.

1) Unauthorized Usage

The first credit card protection shields you against liability for unauthorized use of your credit card, that is, when someone steals, borrows or otherwise uses your card or card number without permission.

Under the law, your liability for unauthorized use of your credit card is limited to $50. If someone steals your card, for example, your credit card lender can charge you a maximum of $50 no matter how much the thief has charged on your card. (That being said, most reputable credit card companies will waive that $50 and give you zero fraud liability.)

Some credit card lenders have been telling consumers they can only report unauthorized use by sending a written billing error notice within 60 days of receiving the bill with the unauthorized charge. This is not true. You can report unauthorized use over the telephone. You also are not required to do so within 60 days, although the sooner you report it, the better (only for “unauthorized charges” there reportedly is no time limit).

After you report an unauthorized charge, the credit card lender must conduct a “reasonable” investigation of your claim, unless it simply decides to take the charge off your account. A reasonable investigation might include analyzing the signature on the credit card slip, obtaining a copy of a police report, or comparing where a purchase was made versus where you live.

2) Billing errors

Before going in to more details, it’s important to know the difference between “billing errors” and “disputes of quality.” Understand that these are two totally different things and you have different rights for each.

First, let’s talk about billing errors:

The following is an example of several billing errors:

  • charges for goods and services you didn't accept or that weren't delivered as agreed;

  • failure to post payments and other credits, like returns;

  • failure to send bills to your current address — assuming the creditor has your change of address, in writing, at least 20 days before the billing period ends.

  • Returned goods ordered because they were defective but did not get a credit.

  • The merchant sent the wrong goods.

  • The merchant did not complete the services contracted for or performed them incompletely.

  • Although agreed to buy something from this merchant, did not authorize them to bill my account.

Under the law, you must raise a dispute within sixty (60) days of the first bill with the improper charge. You must raise the dispute in writing and include the following information: Name and account number, the dollar amount in dispute and a statement of the reason for the dispute.

You must send your letter of dispute to the address provided by the lender for this purpose. Information about this address and how to raise a dispute appears on the back of your credit card statement. (Generally speaking, disputes can be handled easily over the phone with most major credit card companies. However, the legal protection applies only in writing. Since the FTC website says you must mail a letter in order to be covered, then you should do that especially if it’s for a large dollar amount).

You cannot raise a complaint about the quality of merchandise or services you bought with a credit card in the form of a billing dispute. However, you can withhold payment to your credit card lender for poor quality goods or services in many cases, which is the third type of credit card protection discussed further below.

Within 30 days of receiving your dispute, the credit card company must respond to you in writing to confirm they received it. If you choose to only make the complaint over the phone, you still should expect to receive the written confirmation in the mail. However, it usually arrives fairly quickly; within 7 to 10 days.

Once the complaint has been received the credit card company must resolve it within two billing cycles, which is typically 60 days. If for some unusual reason your billing cycle is longer, the maximum amount of time the process can take is 90 days.

During the credit card dispute process investigation, you will not be required to make payments or pay finance charges on the purchase(s) in question.

The creditor may not threaten your credit rating, report you as delinquent, accelerate your debt, or restrict or close your account because your bill is in dispute or you have used your FCBA rights. However, the creditor may report that you are challenging your bill. In addition, it’s against federal law for creditors to discriminate against credit applicants who exercise their rights in good faith under the FCBA. For example, a creditor can’t deny you credit just because you've disputed a bill.

If it turns out that your bill has a mistake, the creditor must explain to you — in writing — the corrections that will be made to your account. In addition to crediting your account, the creditor must remove all finance charges, late fees, or other charges related to the error.

Any creditor who fails to follow the settlement procedure may not collect the amount in dispute, or any related finance charges, up to $50, even if the bill turns out to be correct. For example, if a creditor acknowledges your complaint in 45 days — 15 days too late — or takes more than two billing cycles to resolve a dispute, the penalty applies. The penalty also applies if a creditor threatens to report — or improperly reports — your failure to pay during the dispute period.

3) Quality of Goods & Services

As mentioned, if your complaint is about the quality of goods and services received, the above credit card dispute rules for “billing errors” will not apply. That being said, you will be entitled to other rights of protection if:

  • The purchase is for $50 or higher and it was made within your home state or 100 miles of your billing address. (Note: In some states internet purchases made from your home would qualify).

  • You have already made a “good faith effort” to try and resolve the problems with the seller

If both of the above circumstances apply, you are allowed to take the same legal action against your credit card company that you can take under state law against the seller (so in a nutshell, if the seller violated state laws which entitle you to remedies, then you can go after your card issuer for those same remedies, but you do not receive the same rights of the above dispute process. Many card issuers however, will work with you and resolve your quality of goods dispute).


The information contained in this article is provided to you “AS IS”, does not constitute legal advice, and we are not acting as your attorney. Nothing that you read or is provided in this article should be used as a substitute for the advice of competent legal counsel.


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