Fair Credit Billing Act: What is It and What Do You Need to Know?

November 21, 2019

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The Fair Credit Billing Act is a federal law designed to protect consumers from unfair credit billing practices. It outlines consumers’ rights to dispute unauthorized charges, charges with errors and undelivered goods or services. One of the most important features of the FCBA is that your maximum liability for unauthorized use of your credit card is $50.

Our guide sums up the basic information you need to know, including your rights as a consumer and how to dispute errors. You can review the full act on the Federal Trade Commission website.

Consumer Rights to Know Under the Fair Credit Billing Act

If you’ve been billed for goods you never received or there are billing errors on your credit card statement, the FCBA provides dispute settlement procedures to rectify these errors. Creditors must respond to your billing dispute within 30 days. You don’t have to pay the disputed amount until the creditor resolves the dispute.

Rights When Your Card is Lost

Under the FCBA, if you report your credit card lost or stolen before it is used, you are not responsible for any unauthorized charges. Reporting the loss or theft of your card to the card issuer as quickly as possible can limit your liability. Additionally, if your credit card number is stolen, you are not liable for unauthorized use.

Your liability for unauthorized use of your credit card tops out at $50. If you find transactions on your billing statement that you don’t recognize, you have 60 days to dispute the incorrect charge. It’s very important to make the request in writing via mail to the card issuer since the FCBA was enacted before the internet was conceived.

The FCBA covers billing disputes related to an “open end” credit account — for example, a credit card or a revolving charge account at a department store. The act does not apply to debit cards or loans such as mortgages or car loans.

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Rights When Disputing a Creditor

The FCBA only covers settlement procedures in relation to billing errors. Those billing errors include:

  • Unauthorized charges
  • Charges with an incorrect date or amount
  • Charges for undelivered goods or services
  • Math errors
  • Failure to post payments or credits for returns
  • Failure to send bills to your current address
  • Charges for which you request clarification or written proof of purchase

In terms of addresses, you must give the creditor written notification of your new address at least 20 days before the billing period ends.

To dispute a charge, send the creditor your name, address, account number and a description of the billing error to the address given for billing inquiries. This address is different than the address you use to send your payments.

In order to be covered under the FCBA, you need to send a written request via mail. You should send your letter along with copies of any documentation that backs up your claim. The FTC provides a sample letter for disputing billing errors on their website.

Here is the timeline for disputing a billing error with a creditor:

  1. The creditor must receive your dispute letter within 60 days after the bill with the error was mailed to you.
  2. Creditors must acknowledge your complaint within 30 days of receiving your dispute.
  3. Creditors must complete their investigation in two billing cycles. They are not allowed to collect payment, charge interest or report it to the credit bureaus at this time.
  4. If you disagree with the results of the investigation, you must respond within 10 days of receiving the explanation.
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If your creditor finds that your bill has a mistake, the creditor must credit your account and remove all late fees or charges related to the error. If the creditor finds the dispute invalid, they must notify you in writing how much you owe and why.

Rights When Disputing with a Merchant

The Fair Credit Billing Act can also help you if you’re having a dispute with a merchant over the quality or receipt of goods or services purchased on a credit card. Since it is not a billing error, the dispute procedure does not apply. However, you can take the same legal actions against the card issuer as you can take under state law against the seller.

In order to qualify for this protection, you must have made a purchase of more than $50 in your home state or within 100 miles of your current billing address. If the seller is also the card issuer, or they have a special relationship, the dollar and distance amounts do not apply.

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Other Rights You Should Know

The Fair Credit Billing Act also offers some other protections. You’ll want to carefully follow the procedures outlined in the law to call upon your rights.

Under the FCBA, businesses that offer you an open line of credit must:

  • Give you a written notice when you open a new account that describes your right to dispute billing errors
  • Provide a billing statement for each period in which you owe money or received a finance charge
  • Send your credit card bill at least 21 days before your payment is due
  • Send your open end credit bill before any finance charges are imposed, and at least 14 days before a minimum payment is due
  • Credit all payments to your account on the date they're received
  • Promptly credit or refund overpayments and other amounts owed to your account

Sending a series of formal dispute letters on time can be complicated and time consuming. If you feel you a creditor recently violated the FCBA and your credit score was negatively affected as a result, Lexington Law can help. Our credit repair services can help you work to remove the inaccurate items listed on your credit report, and in turn, improve your credit score.

Call For A Free Credit Report Consultation

The experts at Lexington Law can help you understand your credit profile and see if you have inaccurate and unverified negative items on your credit report.

Call 1-855-255-0139
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