Posted by William Charles on March 5, 2018
Misc

Published on March 5th, 2018 | by William Charles

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Everything You Ever Wanted To Know About Credit Card Disputes

Introduction

Below is another post in our Ask An Attorney series provided by Alex & Darr, The Points Attorneys. The following is not legal advice. It is written for educational purposes only. If you have a question or if you believe you have a complaint, submit an inquiry on bachuwalaw.com. Without further ado here’s Darr…’

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.

What is a Dispute?

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.

 

What should you include in your dispute?

The law requires that your letter include information that:

  1. Allows the bank to identify the name and account number of the obligated party; 
  2. States that you believe the statement contains a billing error and the amount of the billing error; and,
  3. Sets forth the reasons for the belief.

Here’s a sample letter/letter template provided by the FTC. If you have any questions about crafting your dispute letter please darr@darrlawoffices.com.

Two tips for sending your dispute:

  • First, include in your dispute a request for all “documentary evidence” the bank uses in connection with your dispute. You have a right to this evidence, and if the bank fails to provide it (even if your dispute is found invalid), you may have a claim.
  • Second, send your dispute by certified mail, or with some other means of tracking. This will allow you to assert claims based on the bank’s timeliness, and it prevents the bank from saying it never received the dispute.

What happens after I Send My 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.

  1. The bank can make the corrections you seek in your dispute and send you notice of the change.
  2. The bank can send a written explanation or clarification, only after having conducted an investigation, explaining why the bank believes there is no billing error.
    1. If your dispute is due to goods not being delivered, the bank must determine that the goods were “actually delivered, mailed, or otherwise sent.”
    2. The bank may also request additional information or clarification of your dispute.

What Can I dispute? What’s a billing error?

There are several definitions in the law of what qualifies as a billing error. These are the major ones:

  1. You didn’t authorize the charge. This is the classic fraud or stolen-credit-card dispute.
  2. Something you don’t recognize on the account and believe may be in error. You can ask your bank for additional clarification (and evidence) regarding a charge you don’t recognize. But you must state that you believe there has been a billing error. Simply asking for a copy of a receipt does not trigger the bank’s responsibilities.
  3. Goods or services not accepted by you or not delivered to you in line with the transaction agreement. This is the catch-all dispute provision. If you buy a new phone and it arrives damaged, defective, or otherwise different than promised, this is the basis for your dispute.

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.

And Then What–When To File a Claim?

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.

 

Final Thoughts

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.

If you have any follow-up questions please voice them in the comments. If you have an unrelated question you’d like answered, ask here. If you’d like to discuss anything privately, you can find us at BachuwaLaw.com. Thanks for reading! Also don’t forget to check out the Fine Print series on Frequent Miler. Or the previous posts on our site:



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EO
EO

I recently had fradulent charges on my card. I called and they immediately refunded the charge and sent me a new card. According to this article, I should have written rather than called. Is that really true given I got satisfaction?

Darr - Alex Darr

At the end of the day, results matter. If a phone call got the job done, excellent. (And I’m sorry to hear you had a fraud run in!).

But a phone call does not count as a formal billing dispute. I was going to write more on this, but the article was getting long. If you want to cover yourself, you should send something certified, in the mail, to the billing inquiries address. But, for example, American Express makes it easy to file a dispute online. My concern with that approach is that you have to put your trust in Amex to keep good records. If it get the job done, that’s great, but if Amex drops the ball you’re at a disadvantage.

Whatever gets the job done is the “right” way.

RV3
RV3

Sounds like consumers are still charged interest for the disputed transaction(s)?

If this is the case, i feel most consumers would have done the same as the wine purchaser in your example – to avoid interest. Why is this interest allowed if disputed transaction is found to be unauthorized?

I assume consumer gets interest refunded if lender cannot justify transaction? I don’t mind paying interest if it later gets refunded after investigation concludes transaction was not justified. Hopefully so, because it’s unfair to consumers if not.

Darr - Alex Darr

There is no interest charged while the dispute investigation is pending. However, you have to file the dispute to get that protection. This puts the wine-buyer in a tough situation. Does he sit on the purchase (and pay interest) for 60 days to wait and see if the wine shows (that’s what I would do)? Or does he pay right away, save the interest, but run the risk of getting burnt?

I think I’d need to know more about the wine buyer’s case before giving better advice. For example, if the wine was supposed to arrive in 21-30 days, and by day 30, when payment was due, the wine hadn’t showed up, I would file a dispute immediately. But if the buyer made the purchase knowing that the wine wouldn’t come for 60 days or longer, then it might make sense to dust off a lower APR card and pay interest until the wine arrives.

Carl Pietrantonio
Carl Pietrantonio

Darr - Alex Darr Alex, the wine situation was that the guy bought what are called WINE FUTURES. This is when you buy ahead on a harvest, knowing you will not receive your wine for months, or even well more than a year. Thus, because he HAD TO wait more than the 60 days, and had full expectation of delivery (at that time) he blew the timeliness factor of the dispute because he had done like so many others and paid well ahead of delivery.

Darr - Alex Darr

Thanks for the details Carl Pietrantonio . In that situation, you really are between a rock and a hard place. Not sure there is a best practice for that type of transaction.

Darr - Alex Darr

One more thing I meant to add. If you win your dispute after paying interest for the 60 days or so, that interest is refunded, as far as I can tell. So while it’s best to file the dispute before the interest starts, if you carry the charge, pay the interest, and then win a dispute, you’ll get the interest back.

If you carry the interest and lose the dispute, you’d be out the interest.

Abey

Maybe in Frank Abagnales times they sent disputes in the mail with a horse and wagon but in nowadays disputes are done online or even from the app. No one should have to call up and for sure not send in the mail. Its very easy and quick to dispute online. I dispute charges every month on different cards. Citi bank is the easiest. Amex and Capital One are also pretty basic. Chase is a little tougher.
Plus i read that every dispute under $25 most banks will just permanently credit your dispute because It cost them more then $25 if they have to investigate further.

Daniel
Daniel

Every month?

Darr - Alex Darr

As I say in another comment (awaiting moderation), the online dispute is definitely simple. The issue is keeping a good record of the disputes. I think one can cover themselves by taking lots of screenshots to record the dispute submission. (See Practical Tips to Protect Your Points – https://www.doctorofcredit.com/ask-attorney-practical-tips-protect-points/)

But it is worth keeping in mind that the information being submitted is in Amex’s control not yours. For a $25 dispute I’d probably use an online option (certified mail costs $8-10). But if I were doing a larger dispute, I’d likely opt for the security and paper record of a written submission.

charles
charles

I had an issue for ~40 dollars from citi. I did the dispute online. Super easy and quick. Automatic credit. Just pull up your transaction history there is a dispute button on there.
As for disputing charges every month, are you doing it to be malicious or are these legit?

Wilson
Wilson

Many retailers will automatically produce “evidence” to fight any dispute, so it’s best to shop carefully

Darr - Alex Darr

This is also why it’s important to ask for the documentation for your dispute. Don’t let the retailer send over garbage (or outright lies) for the bank to rubber stamp. Hold the retailers and banks to reasonable standards. I’m not asking for the banks to rubber stamp my disputes, but I want a fair process!

James B.
James B.

I recently filed a dispute for a 2 United Airlines charges related to a canceled flight. Chase sent me a form to fill out and sign.

I had a similar issue with AA last year with a AA charge on a canceled reservation. I filed a dispute through AA and a complete game of tag from AA ensued. This time I decided to file the dispute through the bank to avoid the same game.

Wong
Wong

What were the results of the Untied and AA charges? Got your money back?

James B.
James B.

The United Airlines charge dispute is still being processed. The AA charge was relatively small so I pretty much let it go (too much time on hold with AA customer service and always a circus, etc…….). But next time I will always go through the credit card bank if possible.

Darr - Alex Darr

I hope the dispute went well. The form you received is pretty common. It’s one of the acceptable responses the bank can provide to your dispute.

Don
Don

Let me start by saying thank you for this post. It was very informative.

Just a quick typo, missing the verb in “please [xx] darr@darrlawoffices.com

Does this mean that if I have a charge that I’m disputing and the interest is less than the minimum payment, that I should put an additional charge on there so I never knock down the principal of the purchase?

Darr - Alex Darr

It’s like a madlib. You get to choose what to do with my email 🙂 (But thanks for the pointer. I saw another when I reread).

Interesting question Don. I think your logic is sound. At the same time, I think if push came to shove, a judge or arbitrator would probably side with you, if you show that you’ve made a good faith attempt to comply. Still, better safe than sorry! Great idea!

PoorChurner
PoorChurner

How about resort fees you weren’t aware of until check in at the hotel? Can those be disputed?

Ender
Ender

While this is the law I believe card networks have boarder consumer protections. For instance visa allows you to have a item not received dispute 451 days (cant remember the exact number but longer than a years) for pre-order/future delivery.

Darr - Alex Darr

You’re right. To make things more confusing, Mastercard and Visa have their own internal rules for transactions on their respective networks. However, you’re left to work with Visa or Mastercard for relief. This law puts your bank on the hook and gives you a direct claim against them.

Nikki
Nikki

I filed a dispute with Chase 2 weeks ago regarding the deposit I paid for transferring two phone lines in 8/31/2016. Chase still accepted the dispute, but they said they can only negotiate with AT&T to see if they will pay us back the deposit. However, we have talked to AT&T multiple times and they refused to return our deposit. The store manager claimed they did not charge for the deposit when we were at the store (store manager said there was no deposit/receipt for the two lines), but the AT&T financial department saw the transactions that matched the deposits we paid on that day. Since we, the customer, can’t provide the receipt printed from the store to prove we paid the deposits, the AT&T financial department refused to return our deposit. Is there any other way for Chase to do other then convincing AT&T?

Ken
Ken

The law says “the amount of claims [a cardholder can file cannot] exceed the amount of credit outstanding with respect to [the] transaction.”

How is credit associated with the transaction calculated? Can one allocate payments to certain transactions to avail protection on others?

Max
Max

Hi, can you go more in-depth into each carrier…

Mastercard, Visa, and Amex. I thought that’s what this post was going to be about from the title.

From what I can tell Amex has the best dispute protection because they own the network, and set their own legal requirements that merchants are forced to comply with to be on the Amex network (such as Amex having the last call in all dispute decisions, and essentially all disputes being considered arbitration between amex and the merchant). Visa and Mastercard do not set these same requirements with merchants.

Is this true, can you go into the protections that each provider offers, and the differences between the protection?

Franholio
Franholio

One thing that’s worth noting in the wine case is that the buyer would become an unsecured creditor in a bankruptcy filing, and be entitled to assets pari passu with all the other unsecured creditors. Likely squeezing blood from a stone, but always worth pursuing every avenue to get repaid.

Fred
Fred

Nothing useful here, but my favorite “dispute” was something that was beyond 60 days, so the bank (Citi) said they wouldn’t/couldn’t contact the merchant about it on my behalf. Anyway, I forgot about it for a couple months and then pestered the merchant again, and found someone willing to refund the money (probably 6-10 months after the fact at this point). Shortly after the credit showed in my account, Citi emailed me to let me know they had resolved the dispute in my favor.

On another note, I think Abey is right about the banks automatically deciding small disputes in your favor, although I wouldn’t know if $25 is the magic number. I have had $4 and $8 disputes (both with Chase) that were “resolved” in such a short period of time that I’m sure the merchant wasn’t contacted. With something like this, I wonder if that comes out of the bank or out of the merchant.

Zhi
Zhi

I filed a $15 dispute with Citi and they reimbursed that amount immediately but notified me the following month they would add it to my bill once the vendor refunded my money.
As for Chase, I disputed a travel transaction worth about $2200 due to changes made by the airline to my original ticket. I tried contacting the airline but they gave me the runaround. Chase contacted the airline on my behalf & they refunded me directly.
So maybe it depends on the amount involved

TD
TD

I have read in credit agreement fine print that, to file a dispute, the transaction must have been made within 50 miles of my home address, and I must have tried in good faith to correct the problem with the merchant. In my experience banks do enforce the latter, but not the former, and there’s the whole question about where a Web-based transaction takes place. Care to comment?

Sexy_kitten7
Sexy_kitten7

Disputes are (by nature) adversarial but not in the way you depict. You and your bank are fighting the merchant and their bank. See page 6 below. Generally your statements are taken at face value and your bank only has discretion to take a “disputed dispute” to arbitration or not. The evidentiary burden lies on the merchant and their bank, not yours.

And in practice, most banks temporarily remove charges in dispute so paying extra interest isn’t an issue.

Edit: And the link you posted is for CRA disputes, not merchant disputes *facepalm*

https://usa.visa.com/dam/VCOM/download/merchants/chargeback-management-guidelines-for-visa-merchants.pdf

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