What is the Fair Credit Billing Act?

The Fair Credit Billing Act (FCBA), enacted in 1974, amends the Truth in Lending Act (TILA) and is designed to protect the consumer from unfair credit card billing practices. The act applies to open-end accounts, including credit cards and revolving charge accounts, but not to installment-based payment contracts or debit card transactions. Keep reading to learn more about the Fair Credit Billing Act and how it can benefit credit card users.

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What the Fair Credit Billing Act does

The FCBA provides a set of guidelines for consumers to dispute charges and sets clear timelines for both creditors and consumers to follow during the dispute process.

Billing errors covered under the FCBA

The FCBA empowers consumers to contest billing errors that may appear on their statements. Common errors include:

• Incorrect dates or amounts: Consumers can dispute a statement with inaccurate dates or transaction amounts.
• Unauthorized charges: This may include fraudulent charges carried out by a credit card thief or because of credit card skimming. The act limits your total liability for unauthorized charges to $50, and you're not liable for charges made after you've reported your card as stolen.
• Math errors: Such as if the item amounts in your bill aren't added up correctly, or an incorrect bill total after adding a tip.
• Undelivered items: You can dispute charges for products that you paid for but never received. According to the Consumer Finance Protection Bureau, you may be able to dispute transactions for faulty products that you’ve partially paid for under specific circumstances.
• Incorrectly addressed bills: Credit card bills sent to the wrong address can be disputed if you've informed your creditor of any change in your address beforehand. The creditor must receive your new address 20 days before the end of your billing period, or you can't dispute the bill.
• Missing statement credits: When you return a product and have your credit card transaction reversed, you should receive statement credits for that purchase. Missing credits can be disputed.
• Unfamiliar charges: If you see a suspicious or unfamiliar charge on your credit card statement, you may ask your creditor for proof of purchase or further clarification.

Fair Credit Billing Act vs. the Fair Credit Reporting Act

The Fair Credit Billing Act and the Fair Credit Reporting Act were both created to protect consumer rights, but they are not the same.

The Fair Credit Reporting Act (FCRA) was created to ensure the accuracy, fairness, and privacy of information in credit reports provided by credit bureaus. This act allows you to know what information consumer reporting agency files contain about you, if the information in those files has been used against you, and what your credit score is. You can also dispute incorrect information in your credit report. The FCRA involves credit reports rather than your monthly credit card statement.

Meanwhile, the FCBA focuses on consumer protection with respect to unfair billing practices on credit cards and other revolving charge accounts.

Disputing billing errors under the FCBA

When you want to dispute billing errors, it's important to follow the FCBA's rules to help be protected by federal law. As a starting point, it's a good idea to review your statement as soon as you receive it. If you spot a billing error, here's what to do:

• Notify the credit card company in writing of the error within 60 days of receiving your statement.
• You'll need to write a letter explaining the error and include your name, address, account number, date, and amount of the error. You can find a sample from the Federal Trade Commission here.
• Include proof to support your claim, such as a copy of the relevant receipt.
• Send the letter to your creditor's billing inquiries address.

Your creditor must now send you an acknowledgment of your dispute letter within 30 days. They’ll need to complete the investigation within two billing cycles. After this, you have 10 days to dispute the investigation results if they uphold the charge. If the creditor acknowledges the error, they will delete the disputed charge and remove any charges related to the error.

Did you know?

If you think you're a victim of credit card fraud, you should contact your credit card issuer right away. For Discover ® Cardmembers, you get $0 Fraud Liability Guarantee. You’re never responsible for unauthorized purchases on your Discover Card. 1

What the FCBA means for creditors

The Fair Credit Billing Act requires creditors to follow certain rules designed to protect consumers. Creditors must:

• Acknowledge a consumer dispute letter within 30 days of receiving it.
• Not take any action that may hurt your credit until the dispute is resolved.
• Promptly post payments to your account and refund overpayments (or credit them to your account).

The Act also makes it mandatory for creditors to meet certain billing timelines (such as responding to dispute letters within 30 days), send you written notices explaining your rights to dispute billing errors, and apply payments to your account the same day (if delays would lead to charges like late fees).

While the FCBA has some limitations (writing and mailing a letter is less convenient than sending an email or registering a complaint online), it helps safeguard credit card users from fraud, unauthorized charges, and other miscellaneous billing errors that may otherwise damage their credit score. It also standardizes the process for billing disputes with clearly defined timelines for creditors and consumers. As a consumer, the first step to resolving billing disputes is to monitor your credit card bill regularly and quickly catch and highlight any errors.