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Billing Error Disputes

Under the Fair Credit Billing Act, there are a number of reasons you can dispute an entry on a credit card bill. Here are a few of the most common:

  • You didn't receive a statement
  • The creditor failed to credit your account properly (payment, refund, etc.)
  • You dispute a specific debit or charge

And a couple that are a bit more nebulous:

  • An error of accounting (computation of finance charges, etc.)
  • Clarification and verification of indebtedness (copy of the original agreement, signed credit card receipt, etc.)

Statement errors are easy to dispute, but are also easy for credit card companies to validate—the math is either right or wrong. Clarification and verification is a lot tougher. Merchants are required to maintain records of charge slips, but some merchants either fail to do so or fail to provide copies to the credit card companies upon request. If, for example, you ask for six months' worth of verification of charges, the credit card company is unlikely to be able to comply with your request. The credit card company has 30 days to provide verification, and 90 days total to resolve the dispute.

If your card account is under dispute, the creditor is not allowed to report your account as delinquent; they must report that the account is in dispute, which does not harm your credit. And while a debt liability is under dispute, you are not required to make a payment on that portion of your debt. After all, why should you pay when you might not actually owe? Keep in mind you can only stop paying for the debt that is in dispute; you cannot stop paying your entire bill. Unless you dispute everything on your bill, the credit card company can still report delinquencies on the part of your account that is not under dispute. Make sure you keep track of what is under dispute and what is not, and watch your credit report for inaccurate delinquency reporting.

But here's the key: you have to file a bona fide dispute. If you just pick up your statement and file a dispute saying, in effect, "I don't like the fact I owe this much money," you are wasting your time. Make sure you file a legitimate dispute. Ask for verification of a particular charge. Ask for validation of how interest or penalties were calculated. File a legitimate dispute that will stand up in court if you are sued.

Under the FCBA you have the right to dispute:

  • Unauthorized charges (by law, liability for unauthorized credit card use is limited to $50; if your card is lost, stolen, etc., you are only liable for up to $50 of the unauthorized charges)
  • Charges listing the wrong price or date of purchase
  • Charges for items you did not receive or accept
  • Math errors
  • Payments not credited to your account or credited improperly
  • Bills sent to the wrong address (if you send in a written change of address form within twenty days of when the billing cycle ends, bills should be sent to your new address)

Keep in mind that the FCBA will not cover disputes over price and for charges on items you don't want or that the store refuses to take back. The FCBA covers credit card errors, not disputes with the store or service provider.

The procedure to follow when filing a billing dispute depends upon your situation:

  1. If you are current on your payments, you can dispute the most recent bill.
  2. If you are not current, you must dispute a bill that was current within 60 days of that bill's receipt.
  3. If you are over 60 days past due, you can either become current and go back to step 1, or decide not to dispute at all.

How do you file a billing dispute? Once you identify the specific items you wish to dispute:

  1. Write a letter including your name, account number, date of the bill in dispute, a description of the item in dispute, and the reason why you think the bill is incorrect. Make a copy for your records. Then send your letter by certified mail, return receipt requested.
  2. The credit company must respond acknowledging receipt of the dispute within thirty days of receiving your letter. Within 90 days they must investigate your dispute and render a decision. If you have requested a proof of purchase or other documentation, they must provide that documentation.

After you have received the response you can choose whether to continue the dispute or not. Write a letter within ten days, asking how they arrived at the decision and what information they used to make that decision.

Keep in mind that once 60 days has passed you cannot file a billing dispute.

If you plan to file a dispute, take a simple proactive step. Before you file, get a copy of your credit report. That way, if the creditor notes your account as delinquent rather than in dispute, you can use it to show damage to your credit as an affirmative defense if you receive a lawsuit (or as leverage to get the creditor to remove the entry from your credit report).

In many cases the credit card company will fail to respond. If they do respond, they might not provide sufficient information to resolve the dispute.

After 30 days, send a letter reminding the credit card company it has failed to address the dispute. Keep a copy for your records. Follow up again after 60 days.

After 90 days, check your credit report. See if the credit card company reported the account as disputed or delinquent. If it is reported as "delinquent," the credit card company is in violation of the Fair Credit Billing Act and you can use that as an affirmative defense if you are sued. If it is reported as "in dispute," you can use this as proof that the account was in dispute and you can show that it was not resolved.

Now that you understand the process, should you initiate a billing dispute?

As always, the choice is up to you. However, there is some anecdotal evidence to suggest that filing billing error disputes may increase the likelihood that you will get a credit lawsuit, especially if you use a form letter the creditor has received in the past.

The thinking is this: if you have simply fallen behind on your payments and stopped answering your phone your creditors really don't know what is going on with you. You are part of the vast sea of delinquent accounts that they are trying to collect on and they are holding out hope that you will eventually pay.

However, filing a billing error dispute and then defaulting might signal to the original creditor that you are taking an offensive position and have no intent to pay. This strategy might make you stick out from the crowd. I personally think FCBA disputes are more trouble than they are worth, but, as always, the choice is yours.

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