The Fair Credit Billing Act (Credit Billing Statements)

The Fair Credit Billing Act (Credit Billing Statements)

Note: this article paraphrases the nature of this law. For the complete law itself, go to the Federal Trade Commission website.

It is important to check credit billing account statements regularly. These documents may contain mistakes that could damage your credit status or reflect inaccurate/improper charges on your accounts.

When you find an error or discrepancy, send written notice and contest error immediately.

This act establishes procedures for resolving mistakes on credit billing account statements, to include:

  • Charges that you or anyone you have authorized to use your account, have not made
  • Charges that are incorrectly identified or show the wrong amount or date
  • Computational or similar errors
  • Failure to properly reflect payments or credits
  • Not mailing or delivering credit billing statements to your current address (your change of address notice must be received 20 days before billing period ended)
  • Charges for which you requested an explanation or documentation, due to error

The FCBA generally applies only to “open end” credit accounts, such as, credit cards, revolving charge accounts, and overdraft checking accounts.
It does not apply to loans or credit sales that are paid on a fixed schedule, such as automobile loans or mortgages.
What types of disputes are covered?

  • Charges not made by you or anyone authorized to use your account.
  • Charges which are incorrectly identified or for which the wrong amount or date is shown.
  • Charges for goods and services you did not accept or which were not delivered as agreed.
    Computational or similar error.
  • Failure to properly reflect payments or other credits, such as returns.
  • Not mailing or delivering bills to your current address (provide you give a change of address at least 20 days before billing period ends)
  • 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 the phone and call the company to correct the problem. Understand you can do this, however this does not trigger the legal safeguards under the FCBA.

To be protected by 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 indicated in the very small print on the back of the billing statement..

Make sure the letter contains:

  • Your account number
  • A statement that you believe the bill is inaccurate and why
  • Send certified mail return receipt (tracking purposes)

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 solved sooner. In any case, within two billing cycles and 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 have the right to withhold payment for 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.

If the Creditor Makes the 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 proves the bill is correct, you must be shown in writing how much you owe and why. Always ask for documentation. At this point, you will owe the disputed amount, plus any finance charges that accrued during this process. You may also have to pay the minimum payment amount missed during the dispute process.

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, they must also state that you don’t think you owe the money. Also, you must be told who receives such reports.

If the Creditor Does Not Follow Procedure

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 $50.00, even if the bills turns out to be correct. For example, this penalty would apply if a creditor acknowledges your complaint 45 days or takes more than two billing cycles to resolve your dispute. It also applies if a creditor threatens to report or goes ahead and reports your non payments to anyone. You also have the right to sue a creditor for violating the Fair Credit Billing Act.

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 attorney’s fees and costs. If possible, retain a private attorney who is willing to accept whatever 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 to get a clear understanding before you go to court.

Report FCBA Violations to:

The Consumer Response Center

by phone

by mail
Consumer Response Center
Federal Trade Commission
600 Pennsylvania Avenue NW
Washington, DC 20580