Understanding the Fair Credit Billing Act: Consumer Protections Explained

What Is the Fair Credit Billing Act?

The Fair Credit Billing Act (FCBA) is a federal law passed in 1974 to protect consumers from unfair credit billing practices. It applies to open-end credit accounts, like credit cards and lines of credit, and gives consumers the right to dispute billing errors, unauthorized charges, and charges for goods or services that weren't delivered.

The law, enforced by the Federal Trade Commission (FTC), sets clear timelines, usually within 60 days of receiving the bill, for consumers to file disputes, and it outlines the process that creditors must follow to investigate and resolve them.

Understanding the FCBA's Protections and Processes

The Federal Trade Commission enforces the Fair Credit Billing Act, which covers open-end credit accounts, such as credit cards, charge accounts, and lines of credit. The Act provides consumers with protection from unfair billing practices such as:

• Charges not authorized by the consumer.
• Charges with the wrong date or amount.
• Charges for goods or services that weren't delivered.
• Charges for goods or services that were received but were not as described.
• Calculation errors.
• Charges for which the consumer needs clarification.
• Billing statements delivered to an incorrect address.

Consumer Rights Under the Fair Credit Billing Act

• Consumers have 60 days from their bill receipt to dispute a charge with the card issuer or lender.
• Charges must be over $50 to be eligible for dispute.
• Complaints must be filed in writing.
• However, if a credit card was lost or stolen, consumers may dispute charges by phone rather than in writing.
• Consumers can ask their card issuer to withhold payment and help resolve merchant disputes.
• Unauthorized user charges limit a cardholder's liability to $50.
• 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.
• Consumers can challenge the results of the lender's investigation within 10 days.

Obligations of Card Issuers and Lenders

• The card issuer or other lender has 30 days to acknowledge receipt of a complaint.
• The lender has 90 days to complete an investigation, during which time it is not allowed to try to collect payment on the disputed amount, charge interest on it, or report it to credit bureaus as late. (It can, however, report it as being in dispute.)
• If the lender finds that the dispute is valid, it must correct the error and refund any fees or interest that was charged as a result.
• If the lender decides the dispute is invalid, it must explain its findings and provide documentation to the consumer.

Comparing the FCBA and FCRA: Key Differences and Similarities

The Fair Credit Billing Act is often compared to the Fair Credit Reporting Act (FCRA). Both are designed to protect consumers from bad credit practices, but the purpose of each law is different.

The Fair Credit Reporting Act is a federal law that regulates the collection and reporting of credit information about consumers. The law governs how a consumer's credit information is collected and shared with others.

The FCBA protects against unfair billing, while the FCRA guards against personal information misuse.

The Bottom Line

The Fair Credit Billing Act (FCBA) gives consumers important protections against unfair charges, including transactions, incorrect amounts, and goods or services that were never delivered. It allows cardholders 60 days from the date a statement is received to dispute a charge in writing, unless the card was lost or stolen.

Creditors must acknowledge disputes within 30 days and resolve them within 90, while consumers' liability for unauthorized charges is limited to $50, and many issuers now offer zero-liability policies. Unlike the Fair Credit Reporting Act, which focuses on credit reporting, the FCBA is specifically about billing practices.

Importantly, filing a dispute won't hurt a consumer's credit score, though the account may temporarily show as "in dispute" on their report.