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What is the Fair Credit Billing Act and how does it affect consumers?

April 11, 2020
5 min read
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Credit card consumers have a number of different rights and protections afforded to them, many of which are laid out in the Fair Credit Billing Act (FCBA). The law has been around since 1974 — longer than the first credit card travel rewards program — but most people still don't know what exactly the act entails and how it affects cardholders.

The FCBA protects consumers from unfair billing practices, and includes stipulations about a consumer's liability for unauthorized or inaccurate billing charges. The act covers three main areas where consumers have express rights:

  • Limiting liability of unauthorized or inaccurate purchases
  • Withholding payment while disputes are being investigated
  • Timeliness on behalf of creditors regarding billing

Today, we'll give an overview of your rights in each of those scenarios.

Disputing unauthorized or inaccurate purchases

If you lose your card or it gets stolen, you are protected from any and all unauthorized charges if (and here's the kicker) you report the card as lost or stolen before it is used. Major U.S. credit card issuers make it easy to report a lost or stolen credit card online or through the app. You can even temporarily freeze most credit cards if you've misplaced it.

Related reading: Credit card fraud vs stolen identity

The more space you have on that credit card, the better off you'll be. (Photo by jacoblund/Getty Images)
The FCBA protects consumers when it comes to disputed charges. (Photo by jacoblund/Getty Images)

But even if you don't manage to report it before a an unauthorized charge is made, the Fair Credit Billing Act limits your liability at $50.

Billing errors are also included in the FCBA, including charges with the wrong amount, charges with the wrong date and more. You'll need to provide proof of the error, such as an original receipt. Your creditor must acknowledge the complaint within 30 days, and they have two billing cycles to resolve the dispute.

You have 60 days from the time of the charge to dispute an error or unauthorized charge.

Important tips

Most of the top credit cards feature a "zero liability" feature and the ability to dispute a charge easily directly with the issuer. While there is nothing wrong with using these benefits, keep in mind that doing so may preclude you from protection under the FCBA.

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Related reading: Why a credit card is a smarter choice than a debit card

The Fair Credit Billing Act was created before the internet boom, and it specifically requires consumers to mail a written notice to dispute a transaction within 60 days of the charge in order to be covered by the law.

Withholding payment while disputes are being investigated

The Fair Credit Billing Act states that consumers are not required to pay for the disputed transaction while the dispute is ongoing. Additionally, your creditor cannot take actions related to the dispute that could damage your credit score (such as listing a missed payment because you withheld payment until the issue is resolved).

The process is a bit different if you are having a dispute with a merchant, and not a creditor. If you have an issue with the goods or services rendered by a merchant, you have to make an effort to work it out with that merchant before taking any action against your card issuer. But if you are unable to get the issue corrected with a merchant, you are allowed to take the same legal actions against your credit card issuer under state law as you are the merchant.

(Photo by mixetto/Getty Images)
You don't have to pay for a disputed charge until it is resolved. (Photo by mixetto/Getty Images)

Important tips

While you aren't required to pay for the disputed transactions until an investigation is initially concluded, you do still have to pay your other charges and bills. For example, if your monthly credit card bill is $600 and includes a $150 unauthorized charge, you still have to pay for the other $450 in charges on time. It's only the disputed charge that is allowed to be withheld.

Related reading: TPG readers weigh in on credit card chargeback protection

Timelines on behalf of creditors regarding billing

The FCBA outlines a number of different timelines that apply to creditors. Some of them are mentioned above, such as the creditor having 30 days to acknowledge a complaint and two billing cycles to come to a conclusion regarding a dispute.

Another protection afforded by the FCBA is the timeline of when a payment is posted to your account. Creditors must post payments immediately upon receiving them to protect you from having to pay unwarranted interest or fees.

Important tips

When it comes to disputed charges, the timelines are very strict. If an issuer misses any of those deadlines, they can't collect the disputed amount — regardless of the outcome of the investigation.

But once again, this only applies to disputes that are done through the process outlined in the Fair Credit Billing Act, meaning you have to physically mail in a letter within 60 days of the disputed charge to your creditor. The Federal Trade Commission does have a sample letter available on its website.

Bottom line

The Fair Credit Billing Act is just one of the many pieces of legislation out there that outline the different rights consumers have when it comes to credit cards. It's important to know your rights as a consumer, especially since stolen card information and other data security issues have become more prevalent in the past decade.

Featured image by Getty Images/iStockphoto

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  • You must spend the $300 travel credit before earning 3x points for travel and dining
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  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
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Best premium travel card for value
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

10xEarn 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards®.
5xEarn 5x total points on flights through Chase Ultimate Rewards®.
3xEarn 3x points on other travel and dining.
1xEarn 1 point per $1 spent on all other purchases
  • Intro Offer
    Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®

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  • Annual Fee

    $550
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    740-850
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Why We Chose It

If you are looking to take your premium rewards to the highest level, this card is really a no brainer in our eyes. Chase's Ultimate Rewards make points easy to redeem, with a wide range of 10 airline and three hotel transfer partners and a friendly user interface. Despite the high annual fee, Chase is consistently adding new benefits to keep the card competitive in a fierce premium rewards field.

Pros

  • $300 annual travel credit as reimbursement for travel purchases charged to your card each account anniversary year
  • Access to Chase Ultimate Rewards hotel and airline travel partners
  • Unlimited 3x points on the broad category of travel and dining
  • 50% more value when you redeem your points for travel through Chase Ultimate Rewards®
  • Broad definitions for travel and dining bonus categories

Cons

  • Steep $550 annual fee
  • May not make sense for people that don't travel frequently
  • You must spend the $300 travel credit before earning 3x points for travel and dining
  • No automatic hotel elite status
  • Earn 80,000 bonus points after you spend $4,000 on purchases in the first 3 months from account opening. That's $1,200 toward travel when you redeem through Chase Ultimate Rewards®
  • $300 Annual Travel Credit as reimbursement for travel purchases charged to your card each account anniversary year.
  • Earn 5x total points on flights and 10x total points on hotels and car rentals when you purchase travel through Chase Ultimate Rewards® immediately after the first $300 is spent on travel purchases annually. Earn 3x points on other travel and dining & 1 point per $1 spent on all other purchases
  • Get 50% more value when you redeem your points for travel through Chase Ultimate Rewards®. For example, 80,000 points are worth $1,200 toward travel
  • 1:1 point transfer to leading airline and hotel loyalty programs
  • Access to 1,300+ airport lounges worldwide after an easy, one-time enrollment in Priority Pass™ Select and up to $100 application fee credit every four years for Global Entry, NEXUS, or TSA PreCheck®
  • Count on Trip Cancellation/Interruption Insurance, Auto Rental Collision Damage Waiver, Lost Luggage Insurance and more