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The Fair Credit Billing Act (FCBA) is a federal law enacted in 1974 that limits consumers' liability and protects them from unfair billing practices in several ways. It amended the Truth in Lending Act (TILA), which was enacted six years prior. The FCBA applies to open-end credit accounts, including credit cards, charge cards and home equity lines of credit, but not other types of loans.
What Does the Fair Credit Billing Act Do?
You may be familiar with some of the FCBA's provisions, even if you didn't realize it. The law defines what counts as a billing error, gives you the right to file disputes and creates billing-related requirements for creditors.
Gives You the Right to Dispute Billing Errors
Under the FCBA, you have the right to dispute billing errors that appear on your account statements. These could include:
- Unauthorized charges: For example, charges that occur when someone steals and uses your credit card. You aren't responsible for charges that are made after you've reported the theft, and the FCBA limits your total liability to $50 for unauthorized charges. Major credit card payment networks and issuers often go even further and supersede this requirement with zero liability protections for all unauthorized charges.
- Charges with incorrect dates or amounts
- Charges for products or services that weren't delivered as promised: For example, an item you ordered that wasn't delivered. Some credit cards also offer a purchase protection benefit that may help if an item is lost, stolen or damaged soon after the purchase.
- Bills that are sent to the wrong address: This only applies if you've written to the creditor and it receives your new address at least 20 days before the end of a billing period.
- Questionable charges: You also have the right to request written proof of purchase or an explanation for a charge if you believe there's an error.
If you file a dispute due to a billing error, you don't have to pay the disputed amount and corresponding charges until after the investigation ends. However, you're still responsible for the rest of your bill.
Creates Notice and Timing Requirements for Creditors
Additionally, the FCBA requires creditors to:
- Include a written notice when you open an account, and occasionally for existing accounts, that explains your rights to dispute billing errors.
- Send your bill at least 21 days before the grace period expires if your credit card has a grace period, or at least 14 days before your minimum payment is due if the account doesn't have a grace period.
- Credit your account for overpayments and attempt to refund the overpayment if your account has a negative balance for more than six months. Creditors also must send you a refund within seven business days after receiving a written request.
- Apply payments to your account the day they're received, unless a delay won't lead to extra charges. Creditors can create rules and deadlines, but your payment deadline can't be before 5 p.m. on the bill's due date.
How to Dispute a Billing Error
If you notice a billing error and want to dispute it under the FCBA, you must write and mail a dispute letter to the creditor. You may want to send it by certified mail with a return receipt.
The letter should be mailed to a specific address for billing inquiries and must be received within 60 days of when the creditor sent the billing statement with the disputed charges. The Federal Trade Commission (FTC) has a sample letter you can use as a template. Keep copies of the letter and any additional documentation you send for your records.
Once the creditor receives your dispute, it has two billing cycles (up to 90 days maximum) to investigate and resolve the dispute. Depending on the results, you might have to pay none, part or all of the disputed amount.
If you believe your creditor isn't abiding by the FCBA, you also have the right to sue the creditor. The FCBA allows for the court to order the creditor to pay your attorney's fees and award you damages.
How to Dispute Other Credit Card Charges
There may be instances when you want to dispute a charge that isn't considered a billing error under the FCBA. Or, you may choose to dispute a charge or billing error over the phone or online rather than following the FCBA's process.
For instance, if you're the victim of identity theft, you may want to contact the card issuer right away so it can close the account. Depending on the circumstances, you may also want to report the fraud to the FTC's IdentityTheft.gov website.
Or, you might want to initiate a chargeback if an item you purchased arrives damaged or doesn't match the merchant's description. Before attempting this, however, it's best to try to work out the issue with the merchant first.
Monitor Your Credit Report for Unusual Activity
To quickly detect unauthorized charges and billing errors, it's key to review your billing statements each month. If you use budgeting software, you could also connect and sync your accounts, letting you quickly identify new charges throughout the month.
Monitoring your credit report is also important. With a free account from Experian, you'll receive notifications if someone applies for or opens a new credit account in your name. You can also check your credit reports after the disputes are resolved to make sure the creditor sends an update to the credit bureaus. Sometimes this can take a couple of billing cycles, so don't be surprised if your account's information isn't updated the same day.