Facts for Consumers from the Federal Trade Commission

Fair Credit Billing -- December 1993

Has the department store's computer ever billed you for 
merchandise you returned to the store or never received? Or has 
the credit card company ever charged you twice for the same item 
or failed to properly credit a payment made on your account? 

Credit billing errors do occur, but they are easy to resolve if 
you know how to use the Fair Credit Billing Act (FCBA). Congress 
passed this law in 1975 to help consumers resolve disputes with 
creditors and to ensure fair handling 
of credit accounts.

Which Credit Transactions are Covered?

The FCBA generally applies only to "open end" credit accounts. 
Open end accounts include credit cards, revolving charge accounts 
(such as department store accounts), and overdraft checking. The 
periodic bills, or billing statements, you receive (usually 
monthly) for such accounts are covered by the FCBA. The Act does 
not apply to loans or credit sales which are paid according to a 
fixed schedule until the entire amount is paid back.

What Types of Disputes are Covered?

The FCBA settlement procedure applies only to disputes over 
"billing errors" on periodic statements, such as the following:

l 	Charges not made by you or anyone authorized to use your 
account.

l 	Charges which are incorrectly identified or for which the 
wrong amount or date is shown.

l 	Charges for goods and services you did not accept or which 
were not delivered as agreed.

l 	Computational or similar errors.

l 	Failure to properly reflect payments or other credits, such 
as returns.

l 	Not mailing or delivering bills to your current address 
(provided you give a change of address at least 20 days before 
the billing period ends).

l 	Charges of which you request an explanation or written proof 
of purchase.

How to Use the Settlement Procedure

When many consumers find a mistake on their bill, they pick up 
the phone and call the company to correct the problem. You can do 
this if you wish, but phoning does not trigger the legal 
safeguards under the FCBA.

To be protected under the law, you must send a separate written 
billing error notice to the creditor. Your notice must reach the 
creditor within 60 days after the first bill containing the error 
was mailed to you. Send the notice to the address provided on the 
bill for billing error notices (and not, for example, directly to 
the store, unless the bill says that's where it should be sent). 
In your letter, you must include the following information:

l 	Your name and account number.

l 	A statement that you believe the bill contains a billing 
error and the dollar amount involved.

l 	The reasons why you believe there is a mistake.

It's a good idea to send it by certified mail, with a return 
receipt requested. That way you'll have proof of the dates of 
mailing and receipt. If you wish, send photocopies of sales slips 
or other documents, but keep the originals for your records.

What Must the Creditor Do?

Your letter claiming a billing error must be acknowledged by the 
creditor in writing within 30 days after it is received, unless 
the problem is resolved within that period. In any case, within 
two billing cycles (but not more than 90 days), the creditor must 
conduct a reasonable investigation and either correct the mistake 
or explain why the bill is believed to be correct.

What Happens While a Bill is Being Disputed?

You may withhold payment of the amount in dispute including the 
affected portions of minimum payments and finance charges until 
the dispute is resolved. You are still required to pay any part 
of the bill which is not disputed, including finance and other 
charges on undisputed amounts.

While the FCBA dispute settlement procedure is going on, the 
creditor may not take any legal or other action to collect the 
amount in dispute. Your account may not be closed or restricted 
in any way, except that the disputed amount may be applied 
against your credit limit.

What About Your Credit Rating?

While a bill is being disputed, the creditor may not threaten to 
damage your credit rating or report you as delinquent to anyone. 
However, the creditor is permitted to report that you are 
disputing your bill.

Another federal law, the Equal Credit Opportunity Act, prohibits 
creditors from discriminating against credit applicants who, in 
good faith, exercise their rights under the FCBA. You cannot be 
denied credit merely because you have disputed a bill.

If the Creditor Makes a Mistake

If your bill is found to contain a billing error, the creditor 
must write you explaining the corrections to be made on your 
account. In addition to crediting your account with the amount 
not owed, the creditor must remove all finance charges, late 
fees, or other charges relating to that amount. If the creditor 
concludes that you owe part of the disputed amount, this must be 
explained in writing. You also have the right to request copies 
of documents proving you owe the money.

If the Bill is Correct

If the creditor investigates and still believes the bill is 
correct, you must be told promptly in writing how much you owe 
and why. You may also ask for copies of relevant documents. At 
this point, you will owe the disputed amount, plus any finance 
charges that accumulated while it was disputed. You may also have 
to pay the minimum payment amount missed because of the dispute.

If You Still Disagree

Even after the FCBA dispute settlement procedure has ended, you 
may still feel the bill is wrong. If this happens, write the 
creditor within 10 days after receiving the explanation and say 
you still refuse to pay the disputed amount. At this point, the 
creditor may begin collection procedures. However, if the 
creditor reports you to a credit bureau as delinquent, he must 
also state that you don't think you owe the money. Also, you must 
be told who receives such reports.

If the Creditor Doesn't Follow the Procedures

Any creditor who fails to follow the FCBA dispute settlement 
procedure may not collect the amount in dispute, or any finance 
charges on it, up to $50, even if the bill turns out to be 
correct. For example, this penalty would apply if a creditor 
acknowledges your complaint in 45 days (15 days too late) or 
takes more than two billing cycles to resolve a dispute. It also 
applies if a creditor threatens to report _ or goes ahead and 
improperly reports _ your nonpayments to anyone. You also have 
the right, as more fully described below, to sue a creditor for 
any violation of the FCBA.

Complaints About Quality

Disputes about the quality of goods and services are not 
necessarily "billing errors," so the dispute procedure may not 
apply. However, if you purchase unsatisfactory goods or services 
with a credit card, the FCBA allows you to take the same legal 
actions against the credit card issuer as you could take under 
state law against the seller. If your state law permits you to 
withhold payment to a seller for defective merchandise, or pay 
and sue for a refund, you might also be able to withhold payment 
to your credit card issuer. Because state laws on your right to 
stop payment vary, it is best to get legal advice before you do 
so.

However, before you take legal action, you must give the seller a 
chance to remedy the problem. Also, unless the seller is also the 
card issuer (such as a company that issued you a gasoline credit 
card), you must have bought the item in your home state or within 
100 miles of your current mailing address, and the amount charged 
must have been more than $50.

Other Billing Rights for Consumers

The FCBA also requires "open end" creditors to do the following 
for their customers:

l 	Give you a written notice when you open a new account, and 
at other specified times, describing your right to dispute 
billing errors.

l 	Provide a statement for each billing period in which you owe 
or they owe you more than $1.00.

l 	Mail or deliver your bill to you at least 14 days before the 
payment is due, if you are given a time period within which to 
pay the bill without incurring additional finance or other 
charges.

l 	Credit all payments to your accounts as of the date they are 
received, unless not doing so would not result in extra charges.

l 	Promptly credit or refund overpayments.

You Can Also Sue

You can sue a creditor who violates any FCBA provisions. If you 
win, you may be awarded damages resulting from the violation, 
plus twice the amount of any finance charge (not less than $100 
or more than $1,000). The court may also order the creditor to 
pay your attorney's fees and costs. If possible, retain a private 
attorney who is willing to accept whatever the fee the court 
awards as the entire fee for representing you. Some lawyers may 
not be willing to accept your case unless you agree to pay their 
fee _ win or lose _ or if you will add to a fee awarded by the 
court but which they believe is too low. Be sure you get a full 
explanation of what it could cost before you go to court.

Where to Report FCBA Violations

The Federal Trade Commission (FTC) enforces the FCBA for almost 
all creditors except banks. While the Commission does not 
represent individuals in private disputes, information from 
consumers as to their experiences and concerns is vital to the 
enforcement of the Act. Questions or complaints may be addressed 
to the nearest FTC Regional Office. If they concern national 
creditors, write: Correspondence Branch, Federal Trade 
Commission, Washington, D.C. 20580.

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