What Is the Fair Credit Billing Act (FCBA) and How Does It Protect You?
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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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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).
Fair Credit Billing Act Definition
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.
What Is the Purpose of the Fair Credit Billing Act?
Thanks to the FCBA, you can enjoy the following rights when it comes to your credit card accounts.
- Your issuer must send your credit card bill so that it arrives at least 14 days before the minimum payment due date. (The CARD Act of 2009 now requires card issuers to ensure that your billing statements are delivered at least 21 days before payment is due.)
- If you overpay, your credit card company must credit your account or refund you promptly. If an overpayment credit has remained on your account for more than six months, the card issuer must make a good faith effort to send you a refund.
- You have the right to dispute credit card charges which you believe to be billing errors, including unauthorized charges (learn more about chargebacks).
- Your liability for unauthorized charges is capped at $50, if you report the fraud promptly. (Most credit card issuers will waive even this charge as a matter of customer service.)
- You may be able to dispute credit card charges when you are dissatisfied with the quality of goods or services you received (though these aren’t considered “billing errors” and are treated differently).
- Your creditor must resolve your dispute promptly (within two billing cycles, but not more than 90 days after receiving your dispute letter).
- While an account is in dispute under the Fair Credit Billing Act, you do not have to pay the disputed amount.
- During the investigation of a dispute, your creditor cannot take legal action to collect the disputed amount, threaten your credit rating, report you as delinquent, or restrict/close your account because you have disputed a bill or charge.
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.
How to Dispute a Charge
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.
- Contact your credit card issuer as soon as you discover a purchase you didn’t make, and report the problem.
- Write a follow up letter to your creditor to confirm that you reported the problem.
- Keep a copy of your dispute letter.
- Make sure that your letter reaches the creditor within 60 days of receiving the first bill with an error or fraudulent activity.
- Send your letter via certified mail and ask for a return receipt so you’ll have proof of when the creditor received your dispute.
- It’s important to send your letter to the “billing inquiry” address, not the address used for sending regular payments.
- Be sure that your dispute letter includes all of the following information:
- Your name, current address, and account number
- A description of the billing error or suspected fraudulent activity
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.
- Your card issuer may begin collection procedures.
- Your card issuer may report late payments to the credit bureaus (with a statement that you don’t believe you owe the money).
- Any late payments reported to the credit bureaus could damage your credit scores.
Lost or Stolen Credit Cards
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.
What About Debit Cards?
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.
Keeping Your Account Safe From 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.
- Cut up old credit cards (cutting through the card number) before you throw them away.
- Shred monthly statements before you throw them away or consider signing up for paperless statements.
- Don’t give out your card information over the phone, unless you initiate the call yourself.
- Only carry the credit cards you need. Store the rest in a secure location.
- Report lost/stolen cards or suspicious activity to your card issuer immediately.
- Monitor your credit reports periodically for suspicious activity.
- If you’ve been a victim of identity theft or are worried about fraud, consider placing fraud alerts or credit freezes on your credit reports.
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.
Michelle Lambright Black is a leading credit expert, author, writer, and speaker with over a decade and a half of experience in the credit industry. She is an expert in credit reporting, credit scoring, financing (mortgages, credit cards, loans), debt eradication, budgeting, saving, and identity theft. She is featured monthly at credit seminars, podcasts, and in print. You can connect with Michelle on Twitter (@MichelleLBlack) and Instagram (@CreditWriter).
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