Consumer Credit Law: An Introduction to the Fair Credit Billing Act
by JamieD, Former Moderator
- Created: March 23, 2010, 1:58 pm
- Updated: February 10, 2011, 4:16 pm
It's a safe assumption that at some point your small business will have to rely on personal or business credit cards to operate. If you find an error on one of your account bills, it is important to know your rights as a consumer. The Fair Credit Billing Act exists in order to protect consumers from lasting damage as a result of possible credit account errors.
What is the Fair Credit Billing Act?
Enacted as an amendment to the Truth in Lending Act, the Fair Credit Billing Act (FCBA) is a federal law designed to protect consumers from unfair billing practices and provide a means for addressing billing errors in open-end credit accounts.
What is included in an open-ended credit account?
An open-ended credit account is also known as a revolving account. In these accounts, the creditor has a reasonable expectation of repeated transactions and therefore allows money to be borrowed, repaid, and borrowed again. Open-ended accounts include credit cards and charge card accounts (ex. A department store charge card). Installment contracts, such as one you would take out to pay off a car or a large piece of furniture, are not considered open-ended accounts and therefore not covered by the FCBA.
What constitutes as a billing error?
Billing errors include:
- Unauthorized charges
- Charges that list the wrong date or amount
- Charges for goods or services that are not accepted or weren't delivered as agreed
- Math errors
- Failure to post payments and other credits (ex. returns)
- Failure to send bills to the holder's current address
- Charges for which the consumer requests clarification in writing along with a claimed error
Refer to the Federal Trade Commission (FTC) for more information on disputes covered by the Fair Credit Billing Act.
What should a consumer do if they encounter a billing error?
If you encounter a billing error, you must write to the creditor in question at the address provided for 'billing inquires.' Do not send a letter to address provided for sending payments. This letter should include your name, address, account number, and a description of your billing error. Be sure to also include copies of any sales slips or supporting documents that will prove the error occurred. Your letter should reach the creditor within 60 days after you received the first bill containing the error.
Tip: Send your letter certified mail with a return receipt requested so you'll have proof that the creditor received it.
What happens after a creditor receives a complaint?
After the creditor receives a complaint, they must acknowledge that complaint in writing within 30 days. The Act requires that disputes must be resolved by the creditor within two billing cycles and not more than 90 days after receiving a complaint.
For more information, check out the FCBA's section on correcting billing errors.
What will happen while my claim is being disputed?
While your claim is being disputed you:
- Can withhold payment of the disputed amount and any related fees or charges
- Must pay any parts of your bill that are not related to your billing error
During this time the creditor cannot take any action to collect the money in question nor can your account be closed or restricted. The withheld amount can still be held against your credit limit.
Will my credit rating be affected by filing a claim?
The Equal Credit Opportunity Act prohibits creditors from discriminating against consumers who exercise their rights under the Fair Credit Billing Act. Your credit rating cannot be threatened or reported as delinquent as a result of a filed claim. Creditors are allowed to report only the fact that a consumer has filed a compliant of an alleged error.
What will happen if my claim is correct?
If it is found that a billing error did occur, the creditor must explain, in writing, all corrections that will be made and must remove all related charges and fees (finance and late fees) by crediting your account.
What will happen if my claim is incorrect?
If it is found that a billing error did not occur, and your claim was incorrect, the creditor must promptly explain, in writing, how much you owe and why. In this case, you'll also be required to pay any fees (finance and late fees) accumulated during the dispute.
What should I do if I still disagree with a rejected claim?
If it is found that your claim is incorrect and you still disagree with the creditor's explanation, you must write the creditor within 10 days of receiving an explanation. In the letter you can state your refusal to pay any disputed amounts. Your creditor is then within his rights to begin collection procedures. Your dispute will then be resolved legally with a collection agency.
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