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Credit Card Problem, Credit Problems, Fair Credit

Billing Errors and Overcharges


What kind of problems am I protected against?
The Fair Credit Billing Act protects you from honest errors and outright fraud by merchants when you make the purchase through a bank credit card. These include:

billing errors

  • charges for goods ordered but never shipped
  • charges higher than agreed
  • charges for goods not shipped as ordered
  • charges for products that don't work as represented
  • charges for unsatisfactory services
  • and similar kinds of problems.

    (return to Index)



    There's an error on my bill. What should I do?
    The instructions are printed on your bill, probably on the back. Just follow them. The rules are simple: if you report a problem in writing within 60 days of the billing date, the bank must investigate it and respond to you within 30 days. While they are investigating, you don't have to pay the disputed amount or any finance charges on it. If their investigation shows the item was correct, they can restore finance charges retroactively and you will have to pay them.

    The address to write to is on the bill. Look for a heading like "In case of error" or "Send inquiries to."

    Some banks try to resolve problems over the phone; others insist that you write a letter. If you decide to call before writing, make sure you note the date and time of the call, whom you talked to, and what s/he promised to do (if anything). Then send a letter to the "Send inquiries to" address mentioning this information. (Your letter should make clear that you are confirming a telephone conversation, so that the bank doesn't try twice to resolve the same problem.)

    If you resolve a problem by phone, but the bank doesn't follow through, the confirming letter that you sent will preserve your rights. (return to Index)



    I got ripped off by the merchant. What should I do?
    This apples to any situation listed at the beginning of this section, except billing errors. Fortunately, the U.S. Fair Credit Billing Act gives you strong protection if you used a credit card. Because this comes up so frequently, and people are understandably emotional when they think they've been cheated, I've divided up the answer into several sections that follow.

    The legal language is on the back of your bill, under "Special rule for credit card purchases." (return to Index)



    Exactly which Purchases qualify under the Fair Credit Billing Act?
    You are protected if all of the following are true:

    • The purchase was made with a credit card. (If it was a debit card, the money is already gone from your account and the bank won't get involved.)
    • The amount charged is more than $50. (The amount in dispute could be less, for example if you bought a $90 lamp but were billed $100. The amount in dispute is $10.)
    • You made the purchase somewhere in your home state, or within 100 miles of your mailing address. (I am not an attorney, but my understanding is that if you are having goods shipped to you by mail or phone order, the place of purchase is the address you are having them shipped to.)

    If some of the above are not true, you are still protected if the credit card company owns or operates the merchant, or the credit card company mailed you the advertisement for what you bought. In that case, your purchase is covered by the rules no matter where you bought or how much you paid.

    In addition, you MAY successfully protest charges outside of these parameters, but there is no legal requirement for the credit card company to correct the problem. (return to Index)



    Will the bank get involved right away?
    No. Under the law, you must first try "in good faith" to resolve the problem directly with the seller. (return to Index)



    What does resolving a problem "in good faith" mean?
    "In good faith" is not defined in the law, but in practice it means that you behave like a reasonable person. The merchant is expected to act reasonably, too.

    At a minimum, you should talk to the merchant's customer service department and send a follow-up letter. You have to allow the merchant a reasonable time to respond. What's reasonable? Depends on circumstances. Enough time for mail to go both ways, plus a couple of working days.

    "In good faith" also means that you act promptly. Don't wait three months after the charge shows up on your bill to complain that you never got what you ordered.

    Back orders are a frequent problem. If the merchant tells you the stuff is back ordered, you have the right to cancel the order. (If it's mail order, they're supposed to give you a postage-paid reply card for this.) Then you can tell the merchant you don't want to wait and ask for the charge to be canceled. This may not happen the same day, but it should be reasonably prompt. Wait a few days and call the bank to see if the credit has come through yet. (return to Index)



    Any other hints for dealing with a problem merchant?
    Most importantly, remember that the person you are talking to is probably not the person who caused the problem. Don't yell. (In a letter, don't use lots of capital letters and don't run on at great length.) Don't sound crazy or make threats.

    Plenty of good people work for bad companies. Lots work for good companies that make an occasional mistake. You may be lucky and deal with one of them. If your approach is "You dirty rotten so-and-so!" you probably won't get anywhere. If your approach is "There's a problem here; can you help me?" you'll have a better chance.

    Be prepared with specific information before you call. Have all the paperwork in hand. Make sure you can give the order date, what you ordered (item number and price), when you were promised the items, your credit card number, how much you were charged. Be clear about what you want-- a refund, a replacement, shipment by a certain date, repair, etc. Most people (not all) respond best if you tell them clearly, calmly and reasonably what you want. (return to Index)



    I tried in good faith, but the merchant won't budge. Can the bank help?
    Yes. In fact, the law says the bank must help. (All banks know this and most will be very helpful. Don't expect a fight.)

    Write to the credit card issuer and ask for a credit. (They call it a chargeback but they won't expect you to know that.) Use the same address as for billing errors--see "There's an error in my bill," earlier in this section. Make sure you give these important facts in the letter:

    • date you are writing the letter
    • your name and address, as they appear on the bill
    • your account number, and the statement date on the bill
    • Start with "I am writing about a problem with (company name). The transaction date was (mm/dd), the posting date was (mm/dd), and the transaction amount was $(amount)."
    • Then explain, clearly and briefly, what's wrong.
    • Next, state that you tried in good faith to resolve the problem directly with the merchant, but did not succeed. List dates you made phone calls and what was said by the merchant. Enclose photocopies of your letters to the merchant and the merchant's response, if any. (Don't overload the bank with this. You're showing that you acted in good faith; don't write a novel.)

    (return to Index)



    What does the bank do when I ask for a chargeback?
    The bank will credit your account and charge the amount back to the merchant. This must happen within one billing cycle, if you have done everything you were supposed to. If the merchant doesn't respond, the amount is gone from your bill forever.

    If the merchant disputes the chargeback, the bank has to decide who is telling the truth. If you don't like the decision, you can go to court or pursue other remedies that are beyond the scope of these FAQs. (return to Index)



    What happens to finance charges on the disputed amount?
    You don't have to pay them while the bank is investigating.

    When the bank credits your account, they are also supposed to credit your account with any finance charges that were assessed on the disputed amount from the date of purchase. They may or may not do this without further prompting from you.

    Again, if the disputed charge is later found to be correct, you will have to pay finance charges on it. (return to Index)



    What if I paid my bill in full before I noticed a problem?
    Strictly speaking, the Fair Credit Billing Act says you may not have to pay "the remaining amount due." However, I (and some other consumers) have found that our banks aren't quite so picky.

    My advice (and remember I am not a lawyer) is to follow the standard procedures for disputing a charge and simply not to bring up the issue of whether you've already paid part or all of it. Odds are, your bank won't raise that issue either.

    However... It's best to examine bills carefully before you pay them. If you question a charge on the 58th day, a month or more after you've already paid it, the bank is entitled to wonder if you're really acting "in good faith" as the law requires. (return to Index)



    How do I avoid problems with unauthorized charges?
    From the Wall Street Journal, Friday, July 17, page C1

    "If you find that someone else has used your credit card number, write to the card issuer and specify that an "unauthorized charge" was made. If you don't use those words, the issuer will most likely treat the incident as a "billing error," says Ms. Butler of Bankcard Holders.

    There's a big difference. While a billing error must be reported within 60 days, there are no time limits for reporting unauthorized charges. Most people don't get this straight: in fact, a brochure prepared by the Federal Trade Commission and a pamphlet prepared by American Express incorrectly say that cardholders should report unauthorized transactions as billing errors--and that they have only 60 days to do so. A spokeswoman for American Express says its information came from the FTC; a lawyer for the FTC says the agency is now aware of the mistake.

    The most a cardholder will be liable for if someone used their card is $50, the FTC lawyer says; if the card is not used in the transaction, the cardholder won't have to pay any of it."

    [I believe that last bit, about "if the card is not used," refers to people who find your number somewhere and place orders over the phone, where they give the number but don't have the actual card.]

    The article also has a useful sidebar titled "Preventing Crooks from Getting Your Numbers":

      "When traveling:
    • Ask for carbons of car rental agreement, and destroy. Don't leave rental agreement in car where thieves can get it.
    • Shred travel itineraries and ticket receipts issued by airlines and travel agents.
      When at shops and restaurants:
    • Refuse to write address and phone number on credit slips, or credit card account numbers on checks.
    • Don't let clerk write your driver's license number on your check if it's the same as your Social Security number.
      When using a calling card:
    • Don't use a personal identification number (PIN) that's obvious, such as a birth date, work extension, or consecutive numbers.
    • Cover the phone with your body to prevent anyone from seeing what you dial; if you must tell an operator your account number, assume people are eavesdropping.
      When at home:
    • Destroy all pre-approved credit card applications; when cleaning files, shred old statements, pay stubs, and checks.
    • Don't give card numbers to callers who say you've won a prize.
    • If monthly statement doesn't arrive on time, call the issuer immediately."
    (return to Index)


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