Fair Credit Billing Act (FCBA)

Introduction

The Fair Credit Billing Act (FCBA) is a federal law enacted in 1974 as an amendment to the Truth in Lending Act (TILA). The purpose of the FCBA is to protect consumers from unfair billing practices and to provide a mechanism for addressing billing errors on credit card accounts. This law is instrumental in ensuring that consumers have the means to dispute inaccurate or fraudulent charges and to be informed about their rights concerning credit billing.

Scope and Coverage

The FCBA applies to “open-end” credit accounts, which include credit cards, charge cards, and revolving charge accounts. It does not apply to installment loans or other types of credit agreements where the amount borrowed is paid off according to a fixed schedule.

Key Provisions of the FCBA

Billing Error Resolution

The FCBA provides detailed procedures for consumers and creditors to follow when dealing with billing errors. The types of billing errors covered by the FCBA include:

• Charges for goods and services that were not delivered or accepted.
• Charges for goods and services that were not ordered.
• Incorrect amounts charged.
• Unauthorized charges.
• Failure to reflect payments or other credits properly.
• Computational and clerical errors.
• Statements sent to the wrong address if the consumer had previously informed the creditor of a change of address at least 20 days before the billing cycle ended.

Consumer Rights

Under the FCBA, consumers have the following rights:

• To dispute billing errors by writing to the creditor.
• To withhold payment on the disputed amount while the error is being investigated.
• To be informed of the results of the investigation.
• To receive clarification from the creditor about the disputed amount.

Creditor Responsibilities

Creditors must:

• Acknowledge the consumer’s written dispute within 30 days of receipt.
• Investigate and resolve the dispute within two billing cycles (but not more than 90 days).
• Refrain from taking any legal or collection action while the dispute is being investigated.
• Correct the billing error and inform the consumer if an error is found.
• Provide a written explanation if the billing dispute is not resolved in the consumer’s favor.

Liability Limitations

The FCBA limits the consumer’s liability for unauthorized charges to $50. However, many credit card companies waive this fee and offer zero liability for fraudulent charges as a service incentive.

Process for Disputing a Billing Error

Step 1: Review Your Billing Statement

Consumers should regularly review their billing statements to ensure all charges are accurate. Any suspicious or incorrect charges should be identified immediately.

Step 2: Send a Written Notice

To dispute a billing error, consumers must send a written notice to the creditor. This notice must meet specific requirements:

• It must be sent within 60 days after the first billing statement was sent that contained the error.
• It should include the consumer’s name, account number, a description of the billing error, and the reasons why the consumer believes there is an error.

Step 3: Creditor Acknowledgment

Within 30 days of receiving the dispute notice, the creditor must acknowledge receipt in writing.

Step 4: Investigation

The creditor must complete the investigation within two billing cycles (but not more than 90 days). During this period, the consumer is not required to pay the disputed amount, and it cannot be subject to finance charges or reported as delinquent.

Step 5: Resolution

Upon completion of the investigation, the creditor must:

• Correct the error if it is confirmed, removing the disputed charge and any associated fees.
• Provide a written explanation if the error is not confirmed, detailing why the creditor believes the billing statement was correct.

Conclusion

The Fair Credit Billing Act (FCBA) provides vital protections for consumers against unfair billing practices and errors. By outlining a clear process for disputing inaccuracies and limiting consumers’ liability for unauthorized charges, the FCBA helps to ensure that consumers are treated fairly and can trust the integrity of their credit billing statements. It is important for consumers to be aware of their rights under the FCBA and to proactively review and manage their credit accounts to take full advantage of these protections.