The Fair Credit Billing Act (FCBA) is a federal law that mandates the protection of consumers from exploitation by creditors through billing errors. Enacted in 1974, the FCBA was introduced as an amendment to the Truth in Lending Act (1968).
The Fair Credit Billing Act provides a mechanism whereby disputed billing amounts can be addressed. Once a consumer has disputed a billing error, the creditor is required to respond to the dispute without the consumer being required to pay the disputed amount until investigations have been completed.
Common Billing Errors under the Fair Credit Billing Act
The following are some of the common errors that are recognized under the FCBA:
Unauthorized charges captured on the customer’s bill but that were not processed by the consumer
Wrong amount billing
Charges for goods not delivered to the consumer as agreed at the time of purchase
Credit card statement dispatched to an incorrect account
Charges for goods damaged on delivery
Charges that the consumer seeks clarification or proof of
Failure to properly reflect the correct charges to credit or charge accounts
The Consumer’s Rights to Dispute a Billing Error
Disputing a billing error is a straightforward process, and consumers must follow the prescribed rules set by the Fair Credit Billing Act in order to be protected under the law. Some are some of the consumer’s rights provided under the FCBA:
Consumers have 60 days from the date of receiving the bill to dispute a billing error with the creditor. The disputed amount must exceed $50 for it to be eligible for consideration by FCBA. The billing error may be due to calculation errors, unauthorized transaction, or a bill with an incorrect amount or date.
The consumer must send their complaint in writing to the appropriate address that is set for billing inquiries, not to the address for sending payments. The FCBA has provided a sample letter of complaint that consumers can use. Some of the consumer’s personal details indicated in the complaint letter include the official name, physical address, and details about the disputed billing error.
Once the card issuer has received the complaint letter, they should issue an acknowledgment receipt within 30 days. The act requires the issuer to conduct the investigation within two billing cycles (not exceeding 90 days). During this investigation period, the issuer cannot collect the payment on the disputed billing amount or report it to a credit bureau as a defaulted debt. However, the consumer is still required to make payments on subsequent billing for goods delivered by the issuer.
When the Billing Amount is Invalid/Incorrect
If the card issuer finds that there is an error in the billing amount, they are required to correct that error and refund the consumer any fees and interest charged as a result of that error. The issuer must then write to the consumer, explaining how the error will be corrected.
If the consumer owes the creditor a portion of the disputed amount, the creditor must explain why the amount exists and how much the consumer is supposed to pay to clear the bill. The consumer has up to ten days to challenge the outcome of the investigation if they are unsatisfied.
When the Billing Amount is Valid/Correct
If the card issuer comes to the conclusion that the bill was indeed correct, then they should inform the consumer in writing, detailing how much he/she owes and why. The creditor can attach documentation that supports their position.
If unsatisfied with the outcome, the consumer has up to ten days to challenge the findings. The creditor can then commence a process of collecting the disputed amount and report the consumer as delinquent for failing to pay the owed bills.
When the Creditor is Non-Compliant with FCBA Guidelines
In the event that the creditor fails in meeting any of the timelines set by the Fair Credit Billing Act, they cannot collect the disputed bill amount regardless of whether they found the billing correct or incorrect. Also, if the creditor fails to honor the FCBA settlement procedures, they are prevented from collecting the disputed amount.
An example of such a scenario is when the creditor acknowledges the receipt of the complaint letter from the consumer after the allowed timeline has elapsed. Even if the billing turns out to be correct, they still cannot collect the disputed billing amount.
When the rights of the consumers provided under the FCBA act are violated, he/she can file a lawsuit against the creditor. If the court is satisfied that the creditor was in the wrong, it can award damages to the consumer.
The court may also require the creditor to pay double the finance charge if the billing amount ranges between $500 to $5,000. The amount can be higher if the court establishes that the creditor has a history of violations. In some cases, the court may order the creditor to shoulder the attorney fees and costs incurred during the litigation.