Fair Credit Billing Act
The Fair Credit Billing Act is part of the federal
Truth in Lending Act. FCBA establishes procedures
for dispute resolution between creditors and consumers.
It was designed so that you could disagree with
a credit card company ad still maintain your dignity.
Essentials You Should Know:
- The Fair Credit Billing Act applies to "open
end" credit accounts that include: credit
cards, revolving charge accounts, and overdraft
- If you find a mistake on your bill, you must
send a written error notice to the creditor.
It must reach the creditor within 60 days after
the first bill containing the error was mailed
- The creditor must acknowledge your billing
error notice in writing within 30 days after
it is received, unless the problem has already
- While a bill in dispute, the creditor may
not threaten to damage your credit rating or
report you as delinquent to anyone.
What Types of Disputes are Covered?
The Fair Credit Billing Act settlement procedure
applies only to disputes over "billing errors"
on periodic statements, such as the following:
- Charges not made by you or anyone authorized
to use your account.
- Charges which are incorrectly identified
or for which the wrong amount or date is shown.
- Charges for goods or services you did not
accept or which were not delivered as agreed.
- Computational or similar errors.
- Failure to properly reflect payments or other
credits, such as returns.
- Not mailing or delivering bills to your current
address (provided you give a change of address
at least 20 days before the billing period ends).
- Charges for which you request an explanation
or written proof of purchase.
How to Use the Settlement Procedure
You must send a separate written billing error
notice to the creditor. Although a phone call
might get things started you need written proof
if the creditor gets grumpy. Your notice must
reach the creditor within 60 days after the first
bill containing the error was mailed to you. Send
the notice to the address provided on the bill
for billing error notices in your letter; you
must include the following information.
- Your name and account number.
- A statement that you believe the bill contains
a billing error and the dollar amount involved.
- The reasons why you believe there is a mistake.
It's a good idea to send it by certified mail,
with a return receipt requested. That way you'll
have proof of the dates of mailing and receipt.
If you wish, send photocopies of sales slips or
other documents, but keep the originals for your
What Must the Creditor Do?
The creditor must acknowledge your letter claiming
a billing error in writing within 30 days after
it is received, unless the problem is resolved
within that period. In any case, within two billing
cycles (but not more than 90 days), the creditor
must conduct a reasonable investigation and either
correct the mistake or explain why the bill is
believed to be correct.
What Happens While a Bill Is Being Disputed?
You may withhold payment of the amount in dispute,
until the dispute is resolved. You are still required
to pay any part of the bill which is not disputed,
including finance and other charges on undisputed
While the dispute procedure is in effect, the
creditor may not take any legal or other action
to collect the amount in dispute. Your account
may not be closed or restricted in any way, except
that the disputed amount may be applied against
your credit limit.
What about your Credit Rating?
The creditor is not allowed to threaten to damage
your credit rating or report you as delinquent
to anyone while involved in the dispute procedure.
However, the creditor is permitted to report that
you are disputing your bill.
According to another federal law, the Equal
Credit Opportunity Act, creditors cannot discriminate
against credit applicants who, in good faith,
exercise their rights, under the Fair Credit Billing
Act. You cannot be denied credit merely because
you have disputed a bill.
If the Creditor Makes a Mistake
If an error is found, the creditor must write
you explaining what they plan to do about it.
The corrections must be made to your account including,
crediting your account with the amount not owed,
and removing any finance charges, late fees, or
other charges relating to that amount. If they
determine that you owe part of the disputed amount,
this must be explained in writing. You also have
the right to request copies of documents proving
you owe the money.
If the Bill Is Correct
If after investigation the creditor feels the
charges are correct, they must notify you in writing
explaining how much you owe and why. You may also
ask for copies of relevant documents. At this
point, you will owe the disputed amount, plus
any finance charges that accumulated while it
was disputed. You may also have to pay the minimum
payment amount missed because of the dispute.
If You Still Disagree
You may still feel the bill is wrong. If this
happens, write the creditor within 10 days after
receiving the explanation and tell them you still
refuse to pay the disputed amount. At this point,
the creditor may begin collection procedures.
However, if the creditor reports you to a credit
bureau as delinquent, he must also state that
you don't think you owe the money. Also, you must
be told who receives such reports.
If the Creditor Doesn't Follow the Procedures
If a creditor doesn’t follow procedure
they are denied collection of the first $50 of
the amount in dispute or finance charges on it,
even if the bill turns out to be correct. For
example, this penalty would apply if a creditor
acknowledges your complaint in 45 days (15 days
too late) or takes more than two billing cycles
to resolve the dispute. It also applies if a creditor
threatens to report or goes ahead and improperly
reports your nonpayment to anyone. You also have
the right, as more fully described below, to sue
a creditor for violation of the Fair Credit Billing
Complaints and Quality
Disputes about the quality of goods and services
are not necessarily "billing errors,"
so the dispute procedure may not apply. However,
you still may have recourse under the Fair Credit
Billing Act if you have purchase unsatisfactory
goods or services with a credit card. You may
be allowed to take the same legal actions against
the credit card issuer as you could take under
state law against the seller. Because state laws
on your right to stop payment vary, it is best
to get legal advice from your Legal Assistance
Office before you do so. However, before you take
legal action, you must give the seller a chance
to remedy the problem. Also, unless the seller
is also the card issuer (such as a company that
issued you a gasoline credit card), you must have
bought the item in your home state or within 100
miles of your current mailing address, and the
amount must have been more than $50.
Other Billing Rights for Consumers
The Fair Credit Billing Act also required "open
end" creditors to do the following for their
- Give you a written notice when you open a
new account, and at other specified times, describing
your right to dispute billing errors.
- Provide a statement for each billing period
in which you owe--or they owe you--more than
- Send your bill to you at least 14 days before
the payment is due, if you are given a time
period within which to pay the bill without
incurring additional finance or other charges.
- Credit all payments to your account as of
the date they are received, unless not doing
so would not result in extra charges.
- Promptly credit or refund overpayments and
other amounts owed to your account.
You Can Also Sue
You can sue a creditor who violates any Fair
Credit Billing Act provisions. If you win, you
may be awarded damages resulting from the violation,
plus twice the amount of any finance charge (but
not less that $100 or more than $1,000). The court
may also order the creditor to pay your attorney's
fees and costs. You may consult your Legal Assistance
Office for advice about such lawsuits. Be sure
you get a full explanation of what it could cost
before you go to court.
Where to Report FCBA Violations
The Federal Trade Commission (FTC) enforces
the Fair Credit Billing Act for almost all creditors
except banks. While the Commission does not represent
individuals in private disputes, information from
consumers as to their experiences and concerns
is vital to the enforcement of the Act. To file
a complaint, or to get free information on any
of 150 consumer topics, call toll-free, 1-877-FTC-HELP
(1-877-382-4357) or write to Correspondence Branch,
Federal Trade Commission, Washington, D.C. 20580.