What is the Fair Credit Billing Act?

Published by Thomas Herold in Laws & Regulations

'Fair Credit Billing Act' is explained in detail and with examples in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.

Congress passed the Fair Credit Billing act back in 1975. They enacted this national law in order to safeguard consumers from unfair or prejudiced billing actions. It created mechanisms for dealing with billing errors that affect credit accounts which are open ended. This includes credit cards and charge card accounts.

There are many different and all too common types of billing errors that the Fair Credit Billing Act specifies and protects against in its statute. Charges which are an incorrect amount are one. It also covers charges showing up on a bill that the consumer did not process. These are often known as unauthorized charges. Consumers can never be responsible for more than $50 of these. The act also covers the costs of any goods that did not come as they were supposed to when the consumer bought them, as well as for those goods that the consumer never received.

Consumers are similarly protected by the Fair Credit Billing Act from errors in calculation. They can not be held responsible for billing statements which the companies send out to the wrong address. Changes of address are required to be submitted by the account holder in writing and received by the creditor more than 19 days before the billing period ends. Consumers are similarly protected against any charges which they request proof of or clarification for on a statement. They may also not be held liable for a creditor improperly showing payments or charges to their credit accounts.

Customers are able to avail themselves of the protections spelled out in the Fair Credit Billing Act. To do so, they have to begin the process by writing the creditor at their business address specified for billing inquiries. They must include their name and address, account numbers, and any information on the billing dispute in question. The letter must be received by the creditor within 60 days or less of the original bill mailing date.

Such a letter should be dispatched by certified mail with return receipt so that the consumer has conclusive proof of when the creditor received it. All relevant copies of receipts and supporting documents need to be included with the letter. The creditor concerned is required by law to acknowledge that they have received the letter of complaint in 30 days or less after they receive it. The creditor then has up to 90 days (as in two billing cycles) to research and resolve the dispute per the terms of the Fair Credit Billing Act.

The Fair Credit Billing Act also governs what happens when a bill is placed in dispute by a consumer. The person is allowed to not make payments on any charges pertaining to the disputed amount in question. Such a period of withholding only applies throughout the time frame in which the investigation is ongoing. All remaining portions of the bill and relevant interest amounts have to be paid as per the governing credit agreement and terms. The creditor may not engage in any legal action or collection activity against the borrower so long as the investigation phase is ongoing. The account of the borrower is not permitted to be closed or restricted in this phase.

The creditor is also forbidden to make threats against the borrowers’ credit ratings when charges are under investigation and in dispute. The dispute itself can be reported to the credit ratings agencies. Creditors are not allowed to discriminate by withholding credit approval from any consumer who uses his or her rights to dispute a credit charge. This means in practice that consumers may not be refused credit because they have filed disputes against charges on a bill.

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The term 'Fair Credit Billing Act' is included in the Laws & Regulations edition of the Herold Financial Dictionary, which you can get from Amazon in Ebook or Paperback edition.