Credit card companies are big money players that have seen legislation and government intervention work to their advantage. One of the last acts to go against the credit card giants was also one of the first: the Fair Credit Billing Act of 1974. This act proved to be one of the few victories for consumers against the powerful credit card company lobbyists. In this article we will look at the act and what it means to you.

Before the Act
When credit cards debuted, they were easy targets for fraud. Companies took to carpet-bombing potential customers with unsolicited credit cards, and some of these cards were intercepted in the mail by fraudsters. Consumers whose cards were stolen were on the hook for unpaid charges to a card they never wanted in the first place. If the consumers disputed the charges, the credit card companies simply sicced the bill collectors on them and ruined the consumers' credit rating. (For more insight, see The Importance Of Your Credit Rating and How To Dispute A Credit Card Charge.)

In response to these and other unfair practices, Congress passed the Truth in Lending Act (TILA) (1968), which required credit card companies to explicitly state the terms of all loans and all the associated fees and charges; the Fair Credit Reporting Act (1970), which made it possible for consumers to check their credit reports and regulated how companies collected and used this information; and the Equal Credit Opportunity Act (1974), which forbade any screening on the basis of age, race, gender, religion, and so on. It was the Fair Credit Billing Act (1974), however, that gave the consumer the ability to fight back.

Powers of the Act
The Fair Credit Billing Act allows consumers to dispute charges on their credit cards without harming their credit rating. Before the Fair Credit Billing Act, if a consumer withheld payment due to an unfair charge, that counted as a normal non-payment and hurt the consumer's credit rating. Thanks to the Fair Credit Billing Act, consumers can dispute unauthorized charges, charges for an incorrect amount (an overcharge), charges for goods or services that were never delivered or were unsatisfactory, accounting errors (wrong date, non-recorded payment), bills sent to the wrong address, and any charges for which the consumer requires a formal explanation.

Aside from disputes, the Fair Credit Billing Act requires credit card statements to be sent two weeks before payment is due and allows consumers to hold the credit card company, in addition to the merchant who sold the goods, responsible for unsatisfactory purchases. In other words, consumers can sue the card company for the value of the purchase if the merchant refuses a refund on valid grounds (faulty product, incomplete service, etc.). It also prohibits merchants from giving discounts to people who pay with cash. Under the act, the credit card companies have the incentive to monitor the merchants who accept their cards and make sure those merchants are honest.

How to Use It
The big secret to using the Fair Credit Billing Act is to put everything in writing. Phone calls and emails simply don't count. Disputes must be filed within 60 days of your credit card bill being mailed. You can call your credit card company to get the actual mailing date if a postmark is missing from the envelope. Your letter of dispute needs to include your name and address, as well as your account number and a description of the dispute.

You may need to take other steps, depending on the charge you're disputing. If you want to get a refund for unsatisfactory goods or services, the disputed charge has to be a worth more than $50 and has to have taken place within 100 miles of your home address. Furthermore, you must make a good faith attempt to reconcile with the other party first. In this case, you'll need to include copies of receipts, contracts, and any other documentation you have as well as a succinct account of your attempt to reconcile. The letter has to be sent to the billing inquiries address listed on the back of your credit card statement. Sending your letter via certified mail is a good idea, because you'll have proof that you sent in a dispute within the 60-day time limit. (For related reading, see How To Read Loan And Credit Card Agreements.)

What Now?
When the credit card issuer receives your letter, it is required by law to acknowledge your dispute within 30 days by letter and to address your dispute within 90 days. After receiving the complaint, the credit card company can't collect on the charge or send any information to credit bureaus that would hurt your credit rating. The credit card company will investigate your claim and send you the results and its decision in writing.

If a disputed charge turns out to have been an error, your account will be credited for the charge. If the credit card company determines that the charge is accurate, you'll be required to pay it. In either case, no late fees can be levied at this point on the amount related to your purchase, but you still have to pay your card debt if there are other legitimate charges mixed in. You may be able to a hold on any payments related to the disputed debt while still paying other charged items by calling the billing department directly and telling them you are in the middle of a claim. (Find out how to reduce your credit card debt in, Expert Tips For Cutting Credit Card Debt.)

If you're certain that the charge is an error, and the credit card company finds otherwise, you can appeal within 10 days of receiving the decision. Be sure to request copies of the documents the company used to decide that the charge was valid. Under the act, the credit card company can put a note on your credit report about non-payment, but it must also state that you're refusing to pay because you believe the charge is an error. (For more, read How To Dispute Errors On Your Credit Report.)

The Fair Credit Billing Act basically adds another level of consumer protection. It gives consumers a way to fight unjust charges without damaging their credit ratings. It also puts some pressure on the credit card companies to make sure that their merchants and vendors are delivering goods and services as promised. Credit card companies have little incentive to scour statements for errors - if the consumer overpays, it's a bonus for the credit card company. If the consumer "misses" a payment, the credit card company gets to charge the consumer more the next time, so it falls to the consumer to diligently check the bill and, through the Fair Credit Billing Act, have any errors corrected.

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