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Fair Credit Billing
Facts for Consumers from the Federal Trade Commission
Fair Credit Billing -- December 1993
Has the department store's computer ever billed you for
merchandise you returned to the store or never received? Or has
the credit card company ever charged you twice for the same item
or failed to properly credit a payment made on your account?
Credit billing errors do occur, but they are easy to resolve if
you know how to use the Fair Credit Billing Act (FCBA). Congress
passed this law in 1975 to help consumers resolve disputes with
creditors and to ensure fair handling
of credit accounts.
Which Credit Transactions are Covered?
The FCBA generally applies only to "open end" credit accounts.
Open end accounts include credit cards, revolving charge accounts
(such as department store accounts), and overdraft checking. The
periodic bills, or billing statements, you receive (usually
monthly) for such accounts are covered by the FCBA. The Act does
not apply to loans or credit sales which are paid according to a
fixed schedule until the entire amount is paid back.
What Types of Disputes are Covered?
The FCBA settlement procedure applies only to disputes over
"billing errors" on periodic statements, such as the following:
l Charges not made by you or anyone authorized to use your
account.
l Charges which are incorrectly identified or for which the
wrong amount or date is shown.
l Charges for goods and services you did not accept or which
were not delivered as agreed.
l Computational or similar errors.
l Failure to properly reflect payments or other credits, such
as returns.
l Not mailing or delivering bills to your current address
(provided you give a change of address at least 20 days before
the billing period ends).
l Charges of which you request an explanation or written proof
of purchase.
How to Use the Settlement Procedure
When many consumers find a mistake on their bill, they pick up
the phone and call the company to correct the problem. You can do
this if you wish, but phoning does not trigger the legal
safeguards under the FCBA.
To be protected under the law, you must send a separate written
billing error notice to the creditor. Your notice must reach the
creditor within 60 days after the first bill containing the error
was mailed to you. Send the notice to the address provided on the
bill for billing error notices (and not, for example, directly to
the store, unless the bill says that's where it should be sent).
In your letter, you must include the following information:
l Your name and account number.
l A statement that you believe the bill contains a billing
error and the dollar amount involved.
l The reasons why you believe there is a mistake.
It's a good idea to send it by certified mail, with a return
receipt requested. That way you'll have proof of the dates of
mailing and receipt. If you wish, send photocopies of sales slips
or other documents, but keep the originals for your records.
What Must the Creditor Do?
Your letter claiming a billing error must be acknowledged by the
creditor in writing within 30 days after it is received, unless
the problem is resolved within that period. In any case, within
two billing cycles (but not more than 90 days), the creditor must
conduct a reasonable investigation and either correct the mistake
or explain why the bill is believed to be correct.
What Happens While a Bill is Being Disputed?
You may withhold payment of the amount in dispute including the
affected portions of minimum payments and finance charges until
the dispute is resolved. You are still required to pay any part
of the bill which is not disputed, including finance and other
charges on undisputed amounts.
While the FCBA dispute settlement procedure is going on, the
creditor may not take any legal or other action to collect the
amount in dispute. Your account may not be closed or restricted
in any way, except that the disputed amount may be applied
against your credit limit.
What About Your Credit Rating?
While a bill is being disputed, the creditor may not threaten to
damage your credit rating or report you as delinquent to anyone.
However, the creditor is permitted to report that you are
disputing your bill.
Another federal law, the Equal Credit Opportunity Act, prohibits
creditors from discriminating against credit applicants who, in
good faith, exercise their rights under the FCBA. You cannot be
denied credit merely because you have disputed a bill.
If the Creditor Makes a Mistake
If your bill is found to contain a billing error, the creditor
must write you explaining the corrections to be made on your
account. In addition to crediting your account with the amount
not owed, the creditor must remove all finance charges, late
fees, or other charges relating to that amount. If the creditor
concludes that you owe part of the disputed amount, this must be
explained in writing. You also have the right to request copies
of documents proving you owe the money.
If the Bill is Correct
If the creditor investigates and still believes the bill is
correct, you must be told promptly in writing how much you owe
and why. You may also ask for copies of relevant documents. At
this point, you will owe the disputed amount, plus any finance
charges that accumulated while it was disputed. You may also have
to pay the minimum payment amount missed because of the dispute.
If You Still Disagree
Even after the FCBA dispute settlement procedure has ended, you
may still feel the bill is wrong. If this happens, write the
creditor within 10 days after receiving the explanation and say
you still refuse to pay the disputed amount. At this point, the
creditor may begin collection procedures. However, if the
creditor reports you to a credit bureau as delinquent, he must
also state that you don't think you owe the money. Also, you must
be told who receives such reports.
If the Creditor Doesn't Follow the Procedures
Any creditor who fails to follow the FCBA dispute settlement
procedure may not collect the amount in dispute, or any finance
charges on it, up to $50, even if the bill turns out to be
correct. For example, this penalty would apply if a creditor
acknowledges your complaint in 45 days (15 days too late) or
takes more than two billing cycles to resolve a dispute. It also
applies if a creditor threatens to report _ or goes ahead and
improperly reports _ your nonpayments to anyone. You also have
the right, as more fully described below, to sue a creditor for
any violation of the FCBA.
Complaints About Quality
Disputes about the quality of goods and services are not
necessarily "billing errors," so the dispute procedure may not
apply. However, if you purchase unsatisfactory goods or services
with a credit card, the FCBA allows you to take the same legal
actions against the credit card issuer as you could take under
state law against the seller. If your state law permits you to
withhold payment to a seller for defective merchandise, or pay
and sue for a refund, you might also be able to withhold payment
to your credit card issuer. Because state laws on your right to
stop payment vary, it is best to get legal advice before you do
so.
However, before you take legal action, you must give the seller a
chance to remedy the problem. Also, unless the seller is also the
card issuer (such as a company that issued you a gasoline credit
card), you must have bought the item in your home state or within
100 miles of your current mailing address, and the amount charged
must have been more than $50.
Other Billing Rights for Consumers
The FCBA also requires "open end" creditors to do the following
for their customers:
l Give you a written notice when you open a new account, and
at other specified times, describing your right to dispute
billing errors.
l Provide a statement for each billing period in which you owe
or they owe you more than $1.00.
l Mail or deliver your bill to you at least 14 days before the
payment is due, if you are given a time period within which to
pay the bill without incurring additional finance or other
charges.
l Credit all payments to your accounts as of the date they are
received, unless not doing so would not result in extra charges.
l Promptly credit or refund overpayments.
You Can Also Sue
You can sue a creditor who violates any FCBA provisions. If you
win, you may be awarded damages resulting from the violation,
plus twice the amount of any finance charge (not less than $100
or more than $1,000). The court may also order the creditor to
pay your attorney's fees and costs. If possible, retain a private
attorney who is willing to accept whatever the fee the court
awards as the entire fee for representing you. Some lawyers may
not be willing to accept your case unless you agree to pay their
fee _ win or lose _ or if you will add to a fee awarded by the
court but which they believe is too low. Be sure you get a full
explanation of what it could cost before you go to court.
Where to Report FCBA Violations
The Federal Trade Commission (FTC) enforces the FCBA for almost
all creditors except banks. While the Commission does not
represent individuals in private disputes, information from
consumers as to their experiences and concerns is vital to the
enforcement of the Act. Questions or complaints may be addressed
to the nearest FTC Regional Office. If they concern national
creditors, write: Correspondence Branch, Federal Trade
Commission, Washington, D.C. 20580.
7/82; 9/91; 9/92
(Downloaded from CompuServe's Consumer Forum (go SAVE) )
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