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Have you ever been contacted by your credit card issuer about a suspicious transaction on your account? Ever checked your credit card statement and discovered charges you don’t recognize? Or found that you’ve been overcharged on a purchase, or billed for merchandise you never received?
If your answer is yes to any of the questions above, it’s a good idea to become familiar with the Fair Credit Billing Act (FCBA).
The Fair Credit Billing Act is a federal law which was enacted in 1974 as an amendment to Regulation Z of the Truth in Lending Act (TILA). The law was designed to protect consumers from unfair credit billing practices.
The law applies to “open end credit accounts.” These include credit cards and revolving charge accounts. The FCBA, however, does not apply to installment loans like mortgages, auto loans, or personal loans which you repay on a fixed schedule.
Thanks to the FCBA, you can enjoy the following rights when it comes to your credit card accounts.
Like many consumer protection laws, the FCBA requires you to be proactive when it comes to credit card fraud. The FCBA offers you certain protections. It doesn’t give them to you automatically.
If you want to take advantage of the protections you’re afforded under the FCBA, here are the steps which the Federal Trade Commission recommends you take.
Once your card issuer has completed the investigation of your dispute, it must notify you in writing of the results.
If the bill was a mistake or fraud, your account must be credited back for the charge. Any related finance charges, late fees, or other fees must be reversed as well.
At this point you should check your credit reports for signs of fraud. The Fair Credit Reporting Act gives you the right to dispute any incorrect information about credit accounts, which could be lowering your credit scores.
On the other hand, if your card issuer determines that you do owe the bill, it must send you an explanation in writing. If you still disagree you can write the card issuer back, but you must do so within 10 days after receiving the explanation letter.
However, at this point it might be better to just go ahead and pay the bill if you can afford to do so. If you refuse to pay the disputed amount (even if you send your card issuer a follow up letter explaining why), the following unpleasant actions may occur.
The FCBA also offers you protection in the event that your credit card is lost or stolen. In fact, if you report the loss of your card before it is used for fraudulent transactions, the FCBA says you are not liable for any charges you didn’t authorize.
If an unauthorized transaction occurs on your debit card, the FCBA does not protect you. Instead, the Electronic Funds Transfer Act (EFTA) offers you protections for fraudulent debit transactions.
EFTA protections for debit cards, however, are not quite as robust as the credit card fraud protections you may enjoy under the FCBA. So using credit cards over debit cards can be a useful way to protect yourself against fraud.
Although you’re offered protection from unauthorized charges under the FCBA, it’s still in your best interest to do everything you can to keep your account information safe. Here are a few best practices you should follow.
It’s your responsibility to promptly report credit card theft, loss, fraud, and billing errors when they occur. As a rule of thumb, you should develop the habit of reviewing your credit card statements carefully each month. When you review your statements, be on the lookout for double billing, incorrect charge amounts, unauthorized transactions, and any other suspicious activity.
The Fair Credit Billing Act (FCBA) provides protections from unfair billing practices. Chief among them are the ability to dispute unauthorized charges on revolving credit accounts, like credit cards, and a $50 liability cap for such charges if they’re reported promptly. The act requires creditors to resolve these disputes within two billing cycles.
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