I’m excited to discuss another issue at the intersection of law and banking. One of the legal areas we like to explore are the consumer-protection laws that give consumers rights and remedies against banks and other financial institutions. In our article on the Chase 5/24 rule, we touched briefly on one of these laws–the Equal Credit Opportunity Act. That law says, among other things, that a bank must give you a specific reason justifying and explaining the closure of your credit card account. Today we’re looking at the Fair Credit Billing Act.
Frank Abagnale, is one of the leading experts on fraud in the banking industry. If you recognize his name, it might be because his life story served as the inspiration for the Spielberg movie “Catch Me If You Can.” As a complete aside, I think the movie is great, and I’ve read two of Abagnale’s books. I recommend all of them!
Abagnale recently gave a Google talk that is excellent beginning to end, but I honed in on a portion where he discussed credit cards and banking safety. Abagnale says “I don’t own a debit card.” Abagnale prefers “the safest form of payment that exists on the face of the earth”–our friend, the credit card. He lays out a bunch of reasons for his decision. Today we’re going to focus on one of those reasons–the credit card dispute.
If you’re reading Doctor of Credit, you’ve heard about credit card disputes. Maybe you’ve filed one yourself.
A dispute is a formal representation to the bank that a charge reported on your credit card is incorrect. The technical name for a dispute is a “billing error notice.”
A dispute must be made in writing. A telephone call will not trigger the protections of the Fair Credit Billing Act. The dispute should be sent to the address designated by the bank as the “billing inquiries” address, and the bank must provide a billing inquiries address on your statement. If you have a statement that does not have that address, that’s a violation (see, “Bringing Your Claim”).
The dispute must be submitted within 60 days of the statement containing the transaction at issue. For example, I have a charge on January 15th that I want to dispute. The statement including that transaction is dated January 31st. I have until 60 days after January 31st to submit my dispute.
The law requires that your letter include information that:
Here’s a sample letter/letter template provided by the FTC. If you have any questions about crafting your dispute letter please email@example.com.
Two tips for sending your dispute:
By sending a dispute, the bank now has to make a move. At the least, the bank must send a written acknowledgement of the dispute within 30 days after receiving your letter. (Again, this is why tracking information is important for your dispute.)
On top of that, within two billing cycles (but no more than 90 days) from when your dispute is received, the bank has two main options.
There are several definitions in the law of what qualifies as a billing error. These are the major ones:
The Fair Credit Billing Act does not require that you specifically say which of these categories your claim falls under. Use common sense in drafting your dispute, and give the bank enough information to do a thorough investigation.
In a perfect world, the bank agrees with your dispute, your account is credited, and everything is fine. Sometimes the bank provides information that demonstrates that the charge is not fraud or otherwise incorrect (maybe a transaction an authorized use made that she or he didn’t recall). In some cases filing a dispute can motivate a stubborn retailer who doesn’t want to make something right. I’ve had several disputes end with one of these successes. But what to do when things don’t go your way?
If you think the bank is wrong in its dispute ruling, you have a right to challenge that decision by bringing a claim under the Fair Credit Billing Act. Make sure you do not pay off the charge if you want to proceed this way! (See “Final Thoughts” below).
In addition to a claim based on an incorrect dispute decision, you can also bring a claim if the bank violates the procedural requirements of the dispute process (which are in place to protect you and your rights). Those rights are not lost if you end up being wrong about your dispute. For example, if you file a dispute and the bank determines the charges were valid, you still have a right to see the documents related to the bank’s investigation. The bank still had a responsibility to acknowledge your dispute within 30 days. The bank still has a requirement to provide you with a “billing inquiries” address. If the bank fails to do what is required of it, it is not respecting your rights under the law, and you may have a claim.
Keep in mind, there’s a good chance you’ve agreed to resolve this dispute by binding arbitration in your card-member agreement. If that’s the case, you want to seek out attorneys who are experienced in consumer arbitration and these types of claims–I know one or two guys who might like to help you.
The rights laid out here are not lost if you end up being wrong about your dispute. For example, if you file a dispute and the bank determines the charges were valid, you still have a right to see the documents related to the bank’s investigation. The bank still had a responsibility to acknowledge your dispute within 30 days. If the bank fails to adhere to what is required of it, it is not respecting your rights under the law, and you may have a claim.
Lastly, some of you may recall an article recently posted here on regarding a credit card dispute. A credit card user purchase six figures in wine, paid off his balance, and the wine never arrived (the retailer filed bankruptcy). The consumer disputed the charges with Amex and Chase, and he lost. He filed a lawsuit, lost that, and appealed to the Tenth Circuit Court of Appeals. The Court held that the consumer could not be protected by the Fair Credit Billing Act because he had paid the balance before disputing it. The law says “the amount of claims [a cardholder can file cannot] exceed the amount of credit outstanding with respect to [the] transaction.” The cardholder lost, and he lost big. Whether or not you think this is a fair outcome, it is worth considering when you have a big charge that might require a dispute. The interest you pay to carry the balance might end up being well worth it.
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