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 [email protected].

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:

• Ask An Attorney: Agreeing to T’s & C’s Won’t Cost You Your Soul
• Ask An Attorney: Is Chase’s 5/24 Rule Legal?
• Ask An Attorney: Practical Tips to Protect Your Points