Fair Credit Billing Act: Consumer Protection Explained
The Fair Credit Billing Act (FCBA) is a federal law that provides consumer protection in cases of billing errors and unauthorized charges on credit card accounts. It was enacted in 1974 and is enforced by the Federal Trade Commission (FTC).
What is the Fair Credit Billing Act?
The Fair Credit Billing Act establishes procedures for resolving billing errors on credit card accounts and sets limits on the consumer’s liability for unauthorized charges. It applies to open-end credit accounts, such as credit cards and revolving charge accounts.
Under the FCBA, consumers have the right to dispute billing errors and unauthorized charges with their credit card issuer. The law also requires credit card issuers to promptly investigate and correct any errors or unauthorized charges reported by the consumer.
Types of Billing Errors and Unauthorized Charges
The FCBA defines several types of billing errors and unauthorized charges that consumers can dispute:
- Overbilling: When the consumer is charged for goods or services they did not purchase or receive.
- Duplicate charges: When the consumer is billed multiple times for the same transaction.
- Charges for undelivered goods or services: When the consumer is billed for goods or services that were not delivered as agreed.
- Mathematical errors: When there are mistakes in the calculation of the total amount due.
The FCBA also prohibits certain practices by credit card issuers, including:
- Issuing credit cards without the consumer’s consent: Credit card issuers are not allowed to send credit cards to consumers without their consent.
- Requiring payment before investigating a dispute: Credit card issuers cannot require consumers to pay the disputed amount before investigating the dispute.
- Adding unauthorized charges to the consumer’s account: Credit card issuers cannot add unauthorized charges to the consumer’s account.
Remedies for Consumers
If a credit card issuer violates the FCBA, consumers have the right to seek remedies, including:
- Refund of the disputed amount: If the credit card issuer determines that the consumer is not liable for the disputed amount, they must refund the amount to the consumer.
- Correction of billing errors: If the credit card issuer determines that there was a billing error, they must correct it and provide the consumer with a written explanation.
- Removal of unauthorized charges: If the credit card issuer determines that there were unauthorized charges, they must remove them from the consumer’s account.
1. Billing Error
A billing error refers to any mistake or unauthorized charge on a credit card statement. It can include incorrect calculations, charges for goods or services not received, charges for goods or services not ordered, duplicate charges, and other similar errors.
A creditor is a person or entity that extends credit to consumers. This can include banks, credit card companies, retail stores, and other financial institutions. Creditors are responsible for issuing credit cards and billing statements to consumers.
A consumer is an individual who uses credit or purchases goods or services for personal, family, or household purposes. The Fair Credit Billing Act applies to consumers who have credit card accounts or revolving charge accounts.
4. Billing Statement
A billing statement is a document sent by a creditor to a consumer on a regular basis, usually monthly. It provides a summary of the consumer’s account activity, including purchases, payments, and any fees or interest charges.
A dispute occurs when a consumer believes there is an error on their billing statement and notifies the creditor in writing. The creditor is then required to investigate the dispute and provide a response within a specified timeframe.
6. Unauthorized Charge
An unauthorized charge is a charge on a credit card statement that was not made or authorized by the cardholder. This can include charges resulting from stolen or lost cards, identity theft, or fraudulent activity.
Noncompliance refers to the failure of a creditor to comply with the provisions of the Fair Credit Billing Act (FCBA). The FCBA sets forth certain requirements that creditors must follow when billing consumers for credit card transactions.
Under the FCBA, creditors are required to provide consumers with a written notification of their rights and responsibilities regarding billing disputes. This notification must be sent to the consumer within 90 days of the first billing statement that contains the disputed charge.
If a consumer notifies the creditor of a billing error, the creditor is obligated to conduct a reasonable investigation into the matter. This investigation must be completed within 30 days of receiving the consumer’s notification. During the investigation, the creditor must refrain from taking any adverse action against the consumer, such as reporting the disputed charge as delinquent.
Upon completion of the investigation, the creditor must provide the consumer with a written explanation of the findings. If an error is found, the creditor must correct the billing statement and remove any related finance charges. If no error is found, the creditor must provide the consumer with a written explanation of the reasons for the finding.
4. Noncompliance Remedies
If a creditor fails to comply with the provisions of the FCBA, the consumer may have certain remedies available to them. These remedies may include the recovery of actual damages, statutory damages, and attorney’s fees. Additionally, the consumer may also be entitled to injunctive relief to prevent further noncompliance by the creditor.
One of the key provisions of the Fair Credit Billing Act (FCBA) is to protect consumers from overbilling by credit card companies or merchants. Overbilling refers to the practice of charging customers for goods or services that they did not receive, or charging them more than the agreed-upon price.
What constitutes overbilling?
Overbilling can occur in various ways, including:
- Duplicate charges: This happens when a customer is billed multiple times for the same transaction. It may be an honest mistake or a deliberate attempt to overcharge the customer.
- Unauthorized charges: These are charges made without the customer’s consent or knowledge. It could be a result of identity theft, fraud, or a mistake by the merchant.
- Price discrepancies: This occurs when the customer is charged a higher amount than the agreed-upon price. It may be due to hidden fees, incorrect pricing, or deceptive practices by the merchant.
Consumer rights and remedies
- Right to dispute: If a consumer believes they have been overbilled, they have the right to dispute the charge with the credit card company or merchant. The dispute must be made in writing and within a specific timeframe.
- Investigation: Once a dispute is received, the credit card company or merchant is required to investigate the claim and provide a response within a certain period. During the investigation, the consumer is not obligated to pay the disputed amount.
- Resolution: If the investigation confirms that the consumer was indeed overbilled, the credit card company or merchant must correct the error and refund the disputed amount. They are also prohibited from reporting the disputed amount as delinquent or charging any additional fees.
Note: It is important for consumers to keep records of their transactions, such as receipts and billing statements, to support their claims in case of overbilling disputes.
Here are some of the prohibited practices under the FCBA:
- Unfairly delaying resolution: Creditors are not allowed to unreasonably delay the investigation and resolution of billing disputes. They must act promptly and in good faith to resolve any disputes.
- Ignoring written notices: Creditors must acknowledge and respond to written notices of billing disputes within a reasonable time frame. They cannot simply ignore or dismiss these notices.
- Requiring excessive documentation: Creditors cannot demand excessive documentation or evidence from consumers in order to investigate a billing dispute. They must only request information that is necessary and relevant to the dispute.
- Threatening negative credit reporting: Creditors are prohibited from threatening to report negative information to credit reporting agencies as a means to coerce payment or discourage consumers from disputing a bill.
- Adding unauthorized charges: Creditors cannot add unauthorized charges to a consumer’s bill. They must obtain the consumer’s consent before adding any additional charges.
- Requiring payment during dispute: Creditors cannot require consumers to make payment on a disputed bill while the investigation is still ongoing. They must suspend any collection efforts until the dispute is resolved.
- Retaliatory actions: Creditors cannot take retaliatory actions against consumers who exercise their rights under the FCBA. This includes actions such as closing the consumer’s account or reducing their credit limit.
These prohibited practices are in place to ensure that consumers are treated fairly and have the ability to dispute billing errors without facing unfair consequences. If a creditor engages in any of these practices, they may be subject to penalties and legal action.
Under the Fair Credit Billing Act (FCBA), consumers have the right to dispute charges on their credit card statements that they believe are incorrect or unauthorized. However, not all disputes are considered “qualifying disputes” under the FCBA. In order for a dispute to be considered qualifying, it must meet certain criteria.
Criteria for Qualifying Disputes
In order for a dispute to be considered qualifying under the FCBA, it must meet the following criteria:
- The disputed charge must be for more than $50.
- The charge must have been made for personal, family, or household purposes.
- The charge must have been made within the same state or within 100 miles of the consumer’s current mailing address.
- The consumer must have made a good faith effort to resolve the dispute with the creditor before filing a dispute under the FCBA.
If a dispute meets all of these criteria, it is considered a qualifying dispute and the consumer has certain rights and protections under the FCBA.
Rights and Protections for Qualifying Disputes
When a consumer files a qualifying dispute under the FCBA, the creditor is required to investigate the dispute and provide a written response within a certain timeframe. During the investigation, the creditor must temporarily remove the disputed amount from the consumer’s account, and they are prohibited from reporting the disputed amount as delinquent to credit reporting agencies.
If the investigation determines that the charge was indeed incorrect or unauthorized, the creditor must correct the error and refund any disputed amounts to the consumer. They are also required to notify the consumer in writing of the resolution of the dispute.
However, if the investigation determines that the charge was accurate and authorized, the creditor is not required to make any changes to the consumer’s account. They must notify the consumer in writing of their findings and provide an explanation for their decision.
Legal Remedies for Qualifying Disputes
If a consumer believes that their rights under the FCBA have been violated, they may have legal remedies available to them. They can file a complaint with the Consumer Financial Protection Bureau (CFPB) or take legal action against the creditor in a court of law.
It is important for consumers to understand their rights and protections under the FCBA when disputing charges on their credit card statements. By knowing the criteria for qualifying disputes and the legal remedies available, consumers can effectively protect themselves against incorrect or unauthorized charges.
|Fair Credit Billing Act
|The company or individual who issued the credit card or extended credit to the consumer
|Overdue or unpaid
|Consumer Financial Protection Bureau (CFPB)
|A U.S. government agency responsible for consumer protection in the financial sector
Under the Fair Credit Billing Act, consumers have various remedies available to them in case of billing errors or disputes with creditors. These remedies are designed to protect consumers and ensure that they are not unfairly charged for goods or services.
One of the main remedies provided by the Act is the right to dispute billing errors. If a consumer believes that there is an error on their credit card statement, they have the right to dispute the charge with the creditor. The creditor is then required to investigate the dispute and correct any errors within a certain timeframe.
In addition to the right to dispute billing errors, the Act also provides remedies for other types of violations. For example, if a creditor engages in prohibited practices, such as misrepresenting the terms of a credit card agreement or engaging in unfair billing practices, the consumer may be entitled to damages. These damages can include actual damages, statutory damages, and attorney’s fees.
Furthermore, if a consumer prevails in a legal action against a creditor, they may be entitled to additional remedies, such as injunctive relief or the recovery of court costs. These additional remedies are designed to provide further protection to consumers and ensure that creditors are held accountable for their actions.
Emily Bibb simplifies finance through bestselling books and articles, bridging complex concepts for everyday understanding. Engaging audiences via social media, she shares insights for financial success. Active in seminars and philanthropy, Bibb aims to create a more financially informed society, driven by her passion for empowering others.