What Is the Fair Credit Billing Act?

What Does the Fair Credit Billing Act Do?

The FCBA defines what counts as a billing error, gives you the right to dispute fraudulent charges and creates billing-related requirements for creditors. The law applies to open-ended credit accounts, such as credit cards and home equity lines of credit, but not debit cards or installment loans, such as mortgages or auto loans.

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, such as:

• Unauthorized charges: If someone steals and uses your credit card, your total liability for unauthorized charges is limited to $50. However, many major credit card payment networks and issuers offer zero liability fraud protection for unauthorized charges as long as you report them right away. So, you won't be responsible for purchases made without your permission.
• Charges with incorrect dates or amounts: If a charge posts to your account with the wrong date or amount, you can dispute it.
• Charges for products or services that weren't delivered as promised: When you place an order, you expect your items to arrive within a few days. But delivery mishaps, inaccurate inventory counts and other snafus may mean your order gets damaged or never arrives. If you don't receive your purchase, you can dispute the charge to get it removed from your bill. Some credit cards also offer purchase protection that may help if an item is lost, stolen or damaged soon after you buy it.
• Charges for items you returned: Merchants often allow consumers to return unwanted items and receive a refund. If the charge remains on your account after making the return (and you've given the merchant ample time to process the refund), you have the right to dispute it.
• Duplicate charges: Occasionally, you may be charged for the same item more than once. If this occurs, you have the right to dispute the duplicate charges to have them removed from your bill.
• Incorrectly applied payments: If you pay more than the minimum due on your credit card, the issuer must apply the overage to the balance with the highest interest rate, followed by the balance with the next highest interest rate (and so on) until the total payment has been applied.
• Bills sent to the wrong address: This only applies if the creditor receives written notification of your new address at least 20 days before the end of the billing period.

Creates Notice and Timing Requirements for Creditors

The law also requires creditors to provide consumers with certain notices and resolve disputes within specific timeframes. Under the FCBA, creditors must:

• Provide an account opening notice: You must receive a written notice explaining your right to dispute billing errors when you open an account and occasionally thereafter.
• Promptly mail billing statements: Creditors must send your bill at least 21 days before your minimum payment is due.
• Credit overpayments to accounts: Creditors must attempt to refund overpayments on accounts that have a negative balance for more than six months and issue refunds to consumers within seven business days of receiving a written request.
• Apply payments on time: The law requires creditors to apply payments to consumer accounts the day they are received. A creditor may not charge interest on an account if the payment is received by 5 p.m. on the bill's due date.
• Acknowledge billing errors: When a consumer disputes a billing error, creditors have 30 days to acknowledge receipt of the dispute.
• Investigate billing errors: Creditors must investigate and resolve disputes within two billing cycles and no more than 90 days.
• Suspend delinquency reporting: During investigations into billing disputes, creditors cannot report disputed charges as delinquent to the consumer credit bureaus. If the investigation reveals that the charge was accurate, creditors must wait at least 10 days before reporting a payment as late to give the consumer time to get their account current.

Fair Credit Billing Act vs. Fair Credit Reporting Act

The FCBA and Fair Credit Reporting Act (FCRA) help protect consumer rights in different ways. The FCBA applies to open-ended credit accounts and allows consumers to dispute billing errors and have inaccurate charges removed. The FCRA applies to the reporting of credit data to the consumer credit bureaus (Experian, TransUnion and Equifax). It helps ensure the information included on your credit reports is accurate and gives you the right to dispute it if it's not.

For example, if you receive your credit card statement and see that a purchase you made appears multiple times, the FCBA allows you to dispute the duplicate charges. If your credit report lists an account you didn't open, the FCRA gives you the right to dispute the error with the credit bureaus. If the investigation finds the account is fraudulent, the FCRA requires the credit bureaus to remove the account and all information associated with it from your credit reports.

How to Dispute a Billing Error

Follow these steps to dispute a billing error under the FCBA.

1. Write and mail a dispute letter to the creditor. The Federal Trade Commission (FTC) has a sample letter you can use as a template. You must initiate billing disputes within 60 days of your statement billing date to the address for billing inquiries, not payments. Keep copies of the letter and all supporting documentation you send for your records.
2. Wait to hear back. Creditors must acknowledge, in writing, receipt of your dispute within 30 days and complete their investigations within two billing cycles—no more than 90 days from the initiation of the dispute.
3. Continue paying the rest of your bill. You don't have to pay the disputed amount or any fees and interest related to the amount in question until the creditor completes its investigation. However, you're still responsible for the rest of your bill. Paying it on time is crucial to avoid late fees, interest charges and negative impacts to your credit.
4. Pay disputed charges (if applicable). Depending on the results of the creditor's investigation, you might have to pay none, part of or all of the disputed charges.

Tip: If you disagree with the creditor's findings, you have 10 days to appeal their decision in writing. However, if you do not pay the disputed amount, the creditor can start collection proceedings.

Monitor Your Accounts for Unusual Activity

Many creditors allow you to set up alerts so you can monitor your accounts in real time, letting you quickly detect unauthorized charges and take action right away.

Whether you set up alerts or not, it's important to regularly review your billing statements and credit reports for unusual activity. Stay on top of your Experian credit report with free credit monitoring. You'll receive real-time alerts to changes in your credit file, allowing you to take action quickly.