What Is the Fair Credit Billing Act?
The Fair Credit Billing Act is a 1974 federal law designed to protect consumers from unfair credit billing practices.
The details all of the rights you have as a consumer to dispute things like unauthorized charges, charges due to errors, and undelivered goods or services.
- The purpose of the Fair Credit Billing Act is to provide consumers with protection from unfair billing practices, covering "open-end" credit accounts such as credit cards or charge accounts.
- Some examples of billing errors covered by the law include unauthorized charges, charges with an incorrect date or amount, and calculation errors.
- Consumers have 60 days from the time they receive their credit card bill to dispute a charge with a card issuer.
- The FCBA protects consumers from unfair billing practices, while the FCRA protects consumers from unfair practices regarding their personal information.
- A chargeback is the return of money to a customer following the successful dispute of a particular transaction.
Understanding the Fair Credit Billing Act
The purpose of the Fair Credit Billing Act is to provide consumers with protection from unfair billing practices, covering "open-end" credit accounts such as credit cards or charge accounts. The law is also designed to give consumers an avenue witch which to dispute billing errors.
Here are few examples of billing errors covered by the law:
- Charges not authorized by the consumer
- Charges with the wrong date or amount
- Charges on goods or services that weren't delivered
- Charges for goods or services that clearly weren't as described
- Calculation errors
- Charges that the consumer needs clarified or proof of
- Statements mailed to the wrong address
The Federal Trade Commission is the primary enforcement agency for the Fair Credit Billing Act.
Requirements of the Fair Credit Billing Act
The Fair Credit Billing Act (FCBA) lays out consumers' rights to dispute credit card issuers' charges.
Consumers have 60 days from the time they receive their credit card bill to dispute a charge with a card issuer.
Charges must be over $50 to be eligible for dispute. They may be unauthorized, display an incorrect date or amount, or contain calculation errors. If a good or service was not delivered, that charge can be disputed.
The card issuer has 30 days to acknowledge receipt of a complaint. They then have two billing cycles to complete their investigation; during that time the issuer is not allowed to try to collect the payment, charge interest on it, or report it to credit bureaus as late. These limitations are only applied to the disputed payment, not other charges made during the same billing cycle, which can still accrue interest and be reported as late if not paid.
If the card issuer finds that the disputed payment was invalid, it must correct the error and refund any fees or interest charged as a result. If it finds there was no error, it must explain its findings and, upon request, provide documentation to back them up.
Consumers can challenge the results of the investigation within 10 days, at which point the issuer must add a note to the charge. The issuer can still try to collect a payment, however.
If a card was lost or stolen, consumers may dispute charges by phone rather than in writing.
If an unauthorized user makes purchases with a card, the card holder's liabilities are limited to $50 (which issuers generally agree to pay).
If a person is authorized to use a card but makes unauthorized purchases with it, those charges are not covered by the Fair Credit Billing Act, and the cardholder is liable for them.
If a consumer has a dispute with a merchant, they can ask the card issuer to withhold payment and request that the issuer helps resolve the dispute; the issuer is not required to settle the disagreement, however. Consumers must meet certain requirements to take advantage of this right: they must approach the vendor first; and unless the vendor is also the card issuer, the purchase must exceed $50 and have been made within 100 miles of the card holder's mailing address.
During an investigation, a consumer may withhold payment on the dispute amount. However, any part of the bill not in question must be paid.
Fair Credit Billing Act (FCBA) vs. Fair Credit Reporting Act (FCRA)
The Fair Credit Billing Act is often compared to the Fair Credit Reporting Act (FCRA). But while they're both designed to protect consumers from bad credit card practices, the purpose of each law is very different.
The Fair Credit Reporting Act is a federal law that regulates the collection and reporting of credit information from consumers. The law governs how a consumer's credit information is collected and shared with others.
In other words, the FCBA protects consumers from unfair billing practices while the FCRA protects consumers from unfair practices regarding their personal information.
The EFTA is designed to protect consumers when they transfer funds electronically. Such methods of transfer include ATMs, direct deposit, Internet banking, and debit card transactions.
The FDCPA, meanwhile, is a law that restricts the actions of third-party debt collectors. Specifically, it sets limits on when the consumer can be contacted, how they can be contacted, and how often they can be contacted.
Fair Credit Billing Act FAQs
What does account in dispute mean under the fair credit billing act?
Under the Fair Credit Billing Act, "account in dispute" refers to the 90-day period in which a credit issuer is investigating a consumer's dispute.
Within the 90 days, the credit issuer must either remedy the situation or send a letter to the consumer explaining why there was no error.
Can you dispute a non-refundable charge?
Yes. Just like with any other charge, the consumer has the right to dispute the transaction as long as there is a valid claim.
Valid claims include not being provided the product or service in the first place or having never signed or authorized the non-refundable charge.
What is a chargeback?
A chargeback is the return of money to a payer (customer) following the successful dispute of a particular transaction. It basically reverses a money transfer from the payer's bank account or credit card.
Will my credit score go down after a dispute?
No. Filing a dispute, on its own, has no impact on your credit score. Of course, if your credit report does change after the dispute is settled, your credit score, in turn, may indeed be impacted—for better or for worse depending on the change.
The Bottom Line
The Fair Credit Billing Act is an important law designed to protect consumers from unfair billing practices. By knowing the ins and outs of this particular law—the billing errors it covers as well as the procedures for remedy—you'll be better prepared to challenge any suspect credit card charges on your own bill.