facts for Consumers

Federal Trade Commission - December 1993 

Fair Credit Billing

fast facts

● The Fair Credit Billing Act generallly applies to 

"open end" credit accounts that include: credit 

cards, revolving charge accounts, and overdraft 

checking. 

● If you find a mistake on your bill, you must send 

a separate written billing error notice to the 

creditor. It must reach the creditor within 60 

days after the first bill containing the error was 

mailed to you. 

● Your billing error notice must be acknowledged 

by the creditor in writing within 30 days after it 

is received, unless the problem is resolved within 

that period. 

● While a bill is being disputed, the creditor may 

not threaten to damage your credit rating or 

report you as delinquent to anyone. 

Bureau of Consumer Protection Office of 

Consumer & Business Education 

(202) 326-3650
Has the department store's computer ever billed you for merchandise you returned to the store or 

never received? Or has the credit card company ever charged you twice for the same item or failed to 

properly credit a payment made on your account? Credit billing errors do occur, but they are easy to 

resolve if you know how to use the Fair Credit Billing Act (FCBA). Congress passed this law in 1975 to 

help consumers resolve disputes with creditors and to ensure fair handling of credit accounts. 

Which credit transactions are covered?

The FCBA generally applies only to "open end" credit accounts. Open end accounts include credit cards, 

revolving charge accounts (such as department store accounts), and overdraft checking. The periodic 

bills, or billing statements, you receive (usually monthly) for such accounts are covered by the FCBA. 

The Act does not apply to loans or credit sales which are paid according to a fixed schedule until the 

entire amount is paid back. 

What types of disputes are covered?

The FCBA settlement procedure applies only to disputes over "billing errors" on periodic statements, 

such as the following: 

* Charges not made by you or anyone authorized to use your account. 

* Charges which are incorrectly identified or for which the wrong amount or date is shown. 

* Charges for goods and services you did not accept or which were not delivered as agreed. 

* Computational or similar errors. 

* Failure to properly reflect payments or other credits, such as returns. 

* Not mailing or delivering bills to your current address (provided you give a change of address at least 

20 days before the billing period ends). 

* Charges of which you request an explanation or written proof of purchase. 

How to Use the Settlement Procedure

When many consumers find a mistake on their bill, they pick up the phone and call the company to 

correct the problem. You can do this if you wish, but phoning does not trigger the legal safeguards under 

the FCBA. 
To be protected under the law, you must send a separate written billing error notice to the creditor. Your 

notice must reach the creditor within 60 days after the first bill containing the error was mailed to you. 

Send the notice to the address provided on the bill for billing error notices (and not, for example, directly 

to the store, unless the bill says that's where it should be sent). In your letter, you must include the 

following information: 

* Your name and account number. 

* A statement that you believe the bill contains a billing error and the dollar amount involved. 

* The reasons why you believe there is a mistake. 

It's a good idea to send it by certified mail, with a return receipt requested. That way you'll have proof of 

the dates of mailing and receipt. If you wish, send photocopies of sales slips or other documents, but 

keep the originals for your records. 

What must the creditor do?

Your letter claiming a billing error must be acknowledged by the creditor in writing within 30 days after 

it is received, unless the problem is resolved within that period. In any case, within two billing cycles 

(but not more than 90 days), the creditor must conduct a reasonable investigation and either correct the 

mistake or explain why the bill is believed to be correct. 

What happens while a bill is being disputed?

You may withhold payment of the amount in dispute including the affected portions of minimum 

payments and finance charges until the dispute is resolved. You are still required to pay any part of the 

bill which is not disputed, including finance and other charges on undisputed amounts. 

While the FCBA dispute settlement procedure is going on, the creditor may not take any legal or other 

action to collect the amount in dispute. Your account may not be closed or restricted in any way, except 

that the disputed amount may be applied against your credit limit. 

What about your credit rating?

While a bill is being disputed, the creditor may not threaten to damage your credit rating or report you as 

delinquent to anyone. However, the creditor is permitted to report that you are disputing your bill. 

Another federal law, the Equal Credit Opportunity Act, prohibits creditors from discriminating against 

credit applicants who, in good faith, exercise their rights under the FCBA. You cannot be denied credit 

merely because you have disputed a bill. 
If the Creditor Makes a Mistake

If your bill is found to contain a billing error, the creditor must write you explaining the corrections to be 

made on your account. In addition to crediting your account with the amount not owed, the creditor must 

remove all finance charges, late fees, or other charges relating to that amount. If the creditor concludes 

that you owe part of the disputed amount, this must be explained in writing. You also have the right to 

request copies of documents proving you owe the money. 

If the Bill is Correct

If the creditor investigates and still believes the bill is correct, you must be told promptly in writing how 

much you owe and why. You may also ask for copies of relevant documents. At this point, you will owe 

the disputed amount, plus any finance charges that accumulated while it was disputed. You may also 

have to pay the minimum payment amount missed because of the dispute. 

If You Still Disagree

Even after the FCBA dispute settlement procedure has ended, you may still feel the bill is wrong. If this 

happens, write the creditor within 10 days after receiving the explanation and say you still refuse to pay 

the disputed amount. At this point, the creditor may begin collection procedures. However, if the 

creditor reports you to a credit bureau as delinquent, he must also state that you don't think you owe the 

money. Also, you must be told who receives such reports. 

If the Creditor Doesn't Follow the Procedures

Any creditor who fails to follow the FCBA dispute settlement procedure may not collect the amount in 

dispute, or any finance charges on it, up to $50, even if the bill turns out to be correct. For example, this 

penalty would apply if a creditor acknowledges your complaint in 45 days (15 days too late) or takes 

more than two billing cycles to resolve a dispute. It also applies if a creditor threatens to report -- or goes 

ahead and improperly reports -- your nonpayments to anyone. You also have the right, as more fully 

described below, to sue a creditor for any violation of the FCBA. 

Complaints About Quality

Disputes about the quality of goods and services are not necessarily "billing errors," so the dispute 

procedure may not apply. However, if you purchase unsatisfactory goods or services with a credit card, 

the FCBA allows you to take the same legal actions against the credit card issuer as you could take 

under state law against the seller. If your state law permits you to withhold payment to a seller for 

defective merchandise, or pay and sue for a refund, you might also be able to withhold payment to your 

credit card issuer. Because state laws on your right to stop payment vary, it is best to get legal advice 
before you do so. 

However, before you take legal action, you must give the seller a chance to remedy the problem. Also, 

unless the seller is also the card issuer (such as a company that issued you a gasoline credit card), you 

must have bought the item in your home state or within 100 miles of your current mailing address, and 

the amount charged must have been more than $50. 

Other Billing Rights for Consumers

The FCBA also requires "open end" creditors to do the following for their customers: 

* Give you a written notice when you open a new account, and at other specified times, describing your 

right to dispute billing errors. 

* Provide a statement for each billing period in which you owe -- or they owe you -- more than $1.00. 

* Mail or deliver your bill to you at least 14 days before the payment is due, if you are given a time 

period within which to pay the bill without incurring additional finance or other charges. 

* Credit all payments to your accounts as of the date they are received, unless not doing so would not 

result in extra charges. 

* Promptly credit or refund overpayments. 

You Can Also Sue

You can sue a creditor who violates any FCBA provisions. If you win, you may be awarded damages 

resulting from the violation, plus twice the amount of any finance charge (not less than $100 or more 

than $1,000). The court may also order the creditor to pay your attorney's fees and costs. If possible, 

retain a private attorney who is willing to accept whatever the fee the court awards as the entire fee for 

representing you. Some lawyers may not be willing to accept your case unless you agree to pay their fee 

-- win or lose -- or if you will add to a fee awarded by the court but which they believe is too low. Be 

sure you get a full explanation of what it could cost before you go to court. 

Where to Report FCBA Violations

The Federal Trade Commission (FTC) enforces the FCBA for almost all creditors except banks. While 

the Commission does not represent individuals in private disputes, information from consumers as to 

their experiences and concerns is vital to the enforcement of the Act. Questions or complaints may be 

addressed to the nearest FTC Regional Office. If they concern national creditors, write: Correspondence 

Branch, Federal Trade Commission, Washington, D.C. 20580. 7/82; 9/91; 9/92