07/03/2013 01:47 pm ET Updated Sep 02, 2013

How to Dispute a Credit Card Charge

Have you ever ordered something online that was delivered damaged -- or never arrived at all? Or been double-billed by a merchant? Or spotted a charge on your credit card statement you didn't make? Most of us have.

Fortunately, the 1975 Fair Credit Billing Act (FCBA) protects your rights during such credit card billing disputes. It also outlines the process you should follow to contest charges made to your account. The Federal Trade Commission is charged with resolving consumer problems using the FCBA and other regulatory tools.

Here's how credit card dispute resolution works:

What qualifies. First of all, FCBA protection applies only to "open end" credit account transactions -- those involving credit cards or revolving charges (e.g., department store accounts). It doesn't cover installment contracts you repay on a fixed schedule, such as car loans.

Billing errors that are covered by the FCBA include:
  • Fraudulent or unauthorized use of your credit card, whether the card was stolen or the merchant charged unapproved items to your account.
  • Charges that list the wrong date or amount.
  • Charges for goods or services you either did not accept or that weren't delivered as agreed.
  • Math errors, such as being charged twice for a transaction.
  • Failure to post payments or other credits (like returns).

(Note: Report suspected fraud immediately. By law, you're only liable for the first $50 in unauthorized charges; however, most card issuers waive that liability if you report the charges quickly.)

Ticking clock. It's important to review all billing statements carefully upon receipt because in order to be covered under FCBA rules most disputed transactions must be reported within 60 days of the statement date on which the error appeared.

First, contact the merchant and try to resolve the billing dispute directly with them. Generally, merchants will want to retain your business and avoid the time and expense incurred when a credit card issuer becomes involved in the dispute.

However, if this good-faith resolution attempt doesn't work, you can escalate the process by filing a written report with your credit card issuer within the 60-day window. The issuer is then obligated to investigate the dispute on your behalf. The card issuer must acknowledge your complaint, in writing, within 30 days after receiving it and resolve the dispute with the merchant within two billing cycles (but not more than 90 days) after receiving your letter.

Send your letter to the card issuer's billing inquiry address (usually found on your monthly statement), not the payment address. Include your name, address, account number and a description of the billing error. (See the FTC's sample dispute letter.) Send via certified mail, return receipt requested, for proof of what the issuer received. Include copies (not originals) of sales slips or other documents that support your position. Keep a copy of your dispute letter.

(Note: Some card issuers allow you to begin the dispute process online or by phone -- check their website for details. But follow up with a mailed letter, just to be safe.)

During the dispute. According to the FTC, you may withhold payment of the disputed amount (and related charges) during the investigation. In fact, many card issuers may voluntarily remove the charge from your account until the matter is resolved since they are representing you, their client, in the dispute.

Other FCBA rules to remember:
  • You still must pay any part of the bill not in question, including finance charges on the undisputed amount.
  • The card issuer may not take any legal or other action to collect the disputed amount and related charges (including finance charges) during the investigation.
  • While your account cannot be closed or restricted, the disputed amount can be applied toward your credit limit.
  • The card issuer also may not threaten your credit rating, report you as delinquent or restrict or close your account because your bill is in dispute or you have used your FCBA rights. However, they may report that you are challenging your bill.
  • In addition, it's against federal law for creditors to discriminate against credit applicants who exercise their rights in good faith under the FCBA. For example, a creditor can't deny you credit just because you've disputed a bill.

Dispute aftermath. If it turns out that your bill contains a mistake, the creditor must explain, in writing, the corrections that will be made to your account. In addition to crediting your account, they must remove all finance charges, late fees, or other charges related to the error.

However, if the card issuer's investigation determines that you owe part -- or all -- of the disputed amount, they must promptly provide you with a written explanation. You may request copies of documents proving you owe the money. At this point, you'll owe the disputed amount, plus any accumulated finance charges. You also may have to pay the minimum amount you missed paying because of the dispute.

If you disagree with the investigation's results, you may further dispute your claim with the creditor, as outlined by the FTC under their section called The Investigation. Just be aware that at this point the creditor may begin collection procedures. If you believe a creditor has violated the FCBA, you may file a complaint with the FTC or sue them in court.

Hopefully, you'll never have a billing dispute that goes to these extremes. But it's good to know how consumer laws protect you, just in case.

This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a legal, tax or financial advisor for specific information on how certain laws apply to you and about your individual financial situation.