Cardholder Rights Under the Fair Credit Billing Act

Susan Weber
Credit Card Statement

Credit cardholders have the right to dispute any merchant charge under the federal Fair Credit Billing Act. Correct statement errors or avoid payment for low quality merchandise or services. Sounds great… but remember, cardholders must follow the correct dispute settlement procedures or they could lose their rights and harm their credit score.

Don't Pay What You Don't Owe

Does your credit card statement show a charge for a pair of red sneakers you purchased online, but never received? Did you return a purple vase to the little antique store on the corner, but you still haven't seen the credit on your billing statement? Have you been waiting six weeks for the contractor to come back and repair the wall that is cracking?

As a cardholder, your rights state that you don't have to pay for merchandise you never received, for merchandise you have returned, or for poor quality merchandise or services. These rights are guaranteed under the federal Fair Credit Billing Act.

The Fair Credit Billing Act details procedures to:

  • Stop payment on low quality merchandise or services.
  • Dispute billing errors on credit cards and department store charge accounts. The Act does not apply to credit accounts that have a fixed payment such as a car loan.
  • Protect you from unfair or confusing billing procedures by card issuers. For example, the Act states that a card issuer must:
    • Provide a written explanation to all new cardholders regarding how to dispute billing errors
    • Provide a statement for each billing period in which you owe money or are eligible for a credit
    • Send your statement at least 14 days before the payment is due
    • Credit all payments to your account on the date they are received
    • Promptly credit or refund overpayments and send any refunds due within seven business days after the card issuer receives your written refund request

    Your Rights under the Fair Credit Billing Act

    On poor quality merchandise or services, you have the right to:
  • Not pay for the merchandise if you can prove that the merchandise is unusable or if the service had no value. To qualify:
    • Submit documentation as required by the card issuer to explain the situation.
    • The purchase must be more than $50.
    • The item must be purchased in your home state or within 100 miles of your current mailing address.

    On billing disputes, you have the right to:

  • Question any charge you feel should not be on your credit card statement
  • Not pay any disputed charge while your credit card issuer is investigating the charge. Although you still must pay any undisputed charges that are on the statement. You can pay online, by mailing in your check or by automatic transfer from your checking account.
  • Contest the results of the investigation
  • Know the name of anyone to whom the card issuer reports any unpaid, disputed charge
  • Have the card issuer report the disputed charge as either being "settled" or "in question" by you.
  • Question any billing error including:
    • Unauthorized charges
    • Charges that list the wrong date or amount
    • Math errors
    • Failure to post payments and credits such as returns
    • Failure to send statements to your current address
    • Charges for which you ask for an explanation, a clarification or a written proof of purchase

    Protect Your Rights

  • Write to the card issuer using the address given on the statement "for billing inquiries." Don't send the letter with your payment or to the payment address. This would only delay the analysis of your billing dispute. The letter should include:
    • Your name
    • Your account number
    • The dollar amount of the suspected error
    • The posting date of the transaction you are disputing
    • A description of the error
    • An explanation of why you think there is an error
    • Copies (don't send your originals!) of sales slips or documents demonstrating the error made by the merchant or card issuer
  • Send your letter by certified mail with return receipt requested. This will provide proof of transmission to the card issuer and proof of the date received.
  • Mail your letter quickly. Your card issuer needs to receive it within 60 days of the date on the first billing statement with the charge you are disputing.
  • You must contest the charge in writing. A telephone call will not protect your rights.
  • If your credit card bill is authorized to automatically be paid from your checking or savings account, you can stop the automatic payment. The card issuer will need to receive your written authorization to stop payment at least three business days before the automatic payment is scheduled.

What Your Card Issuer Will Do

After your card issuer receives your letter detailing the billing error, they have:

  • 30 days to acknowledge back to you that they have received your letter
  • Two billing cycles (up to 90 days) to resolve the dispute or explain why they think the charge was correct.

While You Wait for a Resolution

Your card issuer can continue to bill you for the amount in question including finance charges, although you can still withhold payment on the disputed amount. If the issuer charges any finance charges on this unpaid portion of the statement, they will be refunded if it is determined the charge was incorrect.Do continue to make payments on any undisputed charges on your statement.

If a Billing Mistake Was Made

The card issuer must:

  • Explain to you in writing the corrections that will be made to your account to correct the error. If you owe only a portion of the amount questioned, the issuer must give you a written explanation.
  • Remove any finance charges or late fees related to the charge you disputed.

If a Billing Mistake Was Not Made

The card issuer must:

  • Explain to you in writing how much you owe including any finance charges that accumulated while the dispute was being investigated.

If You Disagree With the Decision

If you don't agree with the card issuer's explanation of the charge you must write to the card issuer within ten days after receiving the explanation telling the issuer that you still refuse to pay the amount in question. You then have the option to take legal action against the merchant.In the meantime, your credit card issuer can:

  • Start collection proceedings against you
  • Report you to the credit bureau as delinquent if you don't pay the disputed charge. The report to the credit bureau must state that you don't think you owe the money. You must be told who has been given reports showing your delinquency.
Cardholder Rights Under the Fair Credit Billing Act