Fair Credit Billing Act (FCBA)

What's even worse than paying bills? Paying a bill that wrongly asks for more than you owe. But many big companies don't like correcting, or even admitting to, mistakes. What can we do? Is there any protection for us? Yes! It is called the Fair Credit Billing Act.

What is the Fair Credit Billing Act (FCBA)? What does it cover? How do we use the FCBA? How can it help us settle a credit dispute and get us fair credit billing? Read on and see.

What is the FCBA?

The FCBA is a federal consumer protection law that sets procedures for dispute settlement on 'open end' credit accounts, like credit cards, or revolving charge accounts, like those from a department store (It does not cover installment loans and credit that are repaid on a fixed schedule.)

What exactly does the FCBA cover?

To benefit from the Fair Credit Billing Act, the dispute must be in regard to a billing error, not a merchandise problem. That means it covers:

• unauthorized charges over $50
• charges with the wrong amount or date
• charges for unaccepted or undelivered services
• errors in computation on your bill
• charges that you requested to be explained because of a claimed error
• charges for which you requested written proof of purchase because of a claimed error

The FCBA also covers disputes involving the creditor's failure to send bills to your current address, as long as you supplied a written change of address at least 20 days before your billing date and the creditor's failure to post payments, returns or other credits.

Credit Card and Revolving Charge Special Provisions

In addition, the FCBA requires credit card and revolving charge lenders to:

• describe your right to dispute errors, in writing, when you open your account and at certain other times as well
• send a statement for each billing period that you owe it, or it owes you, more than a dollar
• send your bill at least 2 weeks before it's due
• credit your payment on the date it is received, according to a reasonable deadline for each day
• credit or refund any money owed to you (like overpayments or chargebacks) promptly. If you request a cash refund, it must be sent within 7 business days after the creditor gets your letter.

How do you use the FCBA for a credit dispute?

The FCBA requires you to follow certain steps:

• Using the customer service or billing inquiries address (not the address where you sent your payments), send a letter stating your full name and address as it appears on the account. Include your account number and a clear description of the disputed billing.
• Be prompt, the letter must reach the creditor within 60 days after the first erroneous bill.
• With your letter, include copies (not originals) of sales slips or any other documents to prove the mistake.

For your own protection, keep a copy of the letter to the creditor about the dispute. Also, send the letter by certified mail, return receipt requested. These will serve as your proof that you met your responsibility under the FCBA.

According to the FCBA, the creditor must respond to you, in writing, within 30 days of receiving your dispute letter, unless the problem has been resolved. After that, the creditor must investigate and resolve the dispute within 2 billing cycles (but not more than 90 days from the date your complaint is received).

While your claim of error is being investigated, you do not have to pay the disputed amount, related charges, or finance charges. The creditor cannot take any action, legal or otherwise, to collect the disputed amount or related fees including finance charges. The creditor may not close or restrict the use of your account, but it may hold the disputed amount against your credit limit.

If there is an error on your bill, the creditor must write to you and must remove not only the charge itself but also any late fees, finance charges or other costs related to the mistake.

If the creditor's investigation finds that there has been an error but not for the full amount you claimed, it must explain to you in writing why you still owe some amount and, if you wish, send you documents to prove their claim.

If there is not an error on your bill, you must be notified in writing by the creditor of how much you owe and why. Again, you may request documentation as proof. You must then pay the disputed amount plus accrued finance charges in accordance with your credit agreement.

If you still think there is an error in your credit billing, you must write to the creditor within 10 days after receiving the explanation stating that you will not pay the disputed charge. Be prepared, because at this point the creditor will probably send your account to a collection agency. The creditor will probably also report your account as delinquent to your area credit bureau. If so, it must also report that you disputed the debt. The creditor must also tell you who gets these reports (usually Experian, Equifax, and Trans Union).

In certain cases, you still may not have to pay. There is a penalty if the creditor doesn't follow the FCBA dispute settlement procedure. It may not collect the disputed amount or any related charges up to $50, even if there was no error. For instance, if the creditor takes 35 days to answer your letter or more than 2 billing cycles to investigate the disputed money, you do not have to pay. The creditor would also be forced to forfeit the disputed amount if it reports, or even threatens to report, your account as delinquent during the investigation.

What affect does this have on my credit rating? None! Though the creditor is allowed to report that you are disputing your bill, it may not report your account delinquent while an item is being challenged. In addition, according to another federal law, the Equal Credit Opportunity Act, you cannot be denied credit because you disputed a bill. (See our article about the ECOA on this website)

How is the FCBA enforced?

If a creditor violates the Fair Credit Billing Act, you can report it to the Federal Trade Commission (FTC). This agency is responsible for enforcing the FCBA for all creditors except banks. (Banking commissions handle those lenders.) To file a complaint, you may call 1-877-382-4357, toll free. You may also use the complaint form on the Commission's website www.ftc.gov.

You can personally sue a creditor that violates the FCBA. You could be awarded damages, plus twice the finance charge (if it is between $100 and $1000). Some courts also require the creditor to cover your legal fees if you win.

A word of caution: be sure you know how much you will have to pay your attorney. Some will simply accept the amount awarded to you by the court. Others will add on to that amount or only represent you if you pay their usual fee whether you win the case or not.

In short, if you know your rights under the FCBA, you are ahead of many consumers when it comes to credit. Don't be afraid to put this knowledge to use in the future. After all, if you don't owe money, why should you pay it?