The Fair Credit Billing Act: The Legal Grounds for Cardholders’ Chargeback Rights
The Fair Credit Billing Act gives consumers the right to dispute inaccurate or fraudulent credit charges. For instance, let’s say a consumer notices an item charged to their account for an incorrect amount or that a charge on their statement appears to be fraudulent. That person has the right to fight the charge under the FCBA.
The law doesn’t establish detailed procedures for disputes, though. It only mandates that card networks and issuers develop these procedures. While this allows for greater flexibility, it also creates some serious issues.
This article will explain what the FCBA is, what it contains, who it affects, and how it can be improved to better serve all parties involved.
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What is the Fair Credit Billing Act?
- Fair Credit Billing Act
The Fair Credit Billing Act of 1974, or FCBA, is a federal law designed to protect consumers from unfair credit billing practices and build consumer confidence in then-new forms of credit in the process. The act serves as the legal basis for the chargeback process.
[noun]/fer • kre • ǝdt • bil • ing • akt/
The Fair Credit Billing Act of 1974 began as an expansion of the Truth in Lending Act (TiLA). This legislation requires lenders to conspicuously provide customers with loan cost information.
In practical terms, TiLA requires lenders disclose the loan terms, total costs to the borrower, and the annual percentage rate (APR) at which interest will be assessed. This must be provided before offering a loan to a potential borrower (credit cards included).
As enacted, the FCBA clarified details of the original legislation while responding to new developments in the industry. For example, the law included rules for disclosing maximum interest rates in a variable-rate credit contract. It also sets standards for a cardholder’s liability in the event of fraud. The best-known legacy of the FCBA, though, is the introduction of chargebacks to the payments industry.
The FCBA was not the last major piece of legislation to impact chargeback management. Subsequent laws, like the Electronic Funds Transfer Act and the Credit CARD Act have changed the payments landscape, too.
Learn more about chargeback lawsRights & Responsibilities Under the FCBA
Primarily, the FCBA is intended to provide consumers with fair standards for credit billing. It does this by guaranteeing certain rights for consumers. This helps level the playing field between them and lenders.
Rights & Responsibilities of Consumers
Requirements for Issuers & Other Lenders
Cardholders are still liable for unauthorized purchases that were made by someone authorized to use their card (i.e. family fraud).
When is it Appropriate to File FCBA Claims?
Primarily, the FCBA is intended to provide consumers with fair standards for credit billing. One key facet of this is the right to seek a correction if a charge occurs due to a mistake or fraudulent activity. So, with that in mind, let’s look more closely at the dispute process from the cardholder’s perspective.
There are three key reasons why a cardholder might be legally entitled to dispute a charge under the FCBA: billing errors, unauthorized charges, and merchant errors.
How Do Cardholders Initiate FCBA Claims?
Cardholders should review their card statements on a regular basis to catch billing errors, unauthorized charges, or other anomalies. If you are a cardholder, and you identify an invalid charge on your statement, you should contact your issuer and dispute the charge in writing no more than 60 days after you receive the statement in question.
The submission should include your name, account number, transaction date and the disputed amount. You should also summarize the transaction, and furnish any evidence you have that might help support your claim.
Your issuer or lender must acknowledge receipt of your complaint within 30 days, and complete an investigation within 90 days or two billing cycles. If you disagree with the outcome of your issuer or lender’s investigation, you may challenge it within 10 days of receiving this notice.
Finally, if your bank or lender refuses to comply with the FCBA, you may lodge an administrative complaint. This can be done through the office of your state’s attorney general, the Consumer Financial Protection Bureau, or the Federal Trade Commission.
Learn more about the chargeback processIs the Fair Credit Billing Act Enough?
The card brands have taken steps to modernize their infrastructures and processes. Both the Visa Claims Resolution and the Mastercard Dispute Resolution initiatives, for example, aimed to streamline chargebacks and make the process fair for everyone. These policy updates were improvements. However, there’s only so much that can be done at the card network level.
Many of the problems tied to chargeback stem from complicated, redundant, or inconstant procedures. Standardizing chargeback rules across card schemes would allow for more transparency, consistent application, and better interpretation by merchants and banks alike.
The Fair Credit Billing Act was a significant step forward for consumer protection in evolving payments. But after several decades of disruption in the industry, it’s time for an upgrade.
The FCBA and other chargeback regulations and procedures are complicated…but chargeback management doesn’t have to be. Contact Chargebacks911 today and learn how you can stop chargebacks and recover revenue, all with the benefit of a 100% ROI guarantee.
FAQs
Is the FCBA the same as the Fair Credit Reporting Act (FCRA)?
No. While the FCBA and FCRA protect consumers from unfair billing practices, the FCBA addresses billing errors and forms the basis for the current chargeback system, while the FCRA safeguards consumers’ rights with respect to credit reporting.
What is the Fair Credit Billing Act in simple terms?
The Fair Credit Billing Act (FCBA) is a 1974 law that protects consumers who take on “open end credit,” like credit cards or charge cards, from unfair billing practices. The FCBA forms the legal basis for today’s chargeback system.
How do you report a Fair Credit Billing Act violation?
You can report a Fair Credit Billing Act violation by writing a formal letter to your bank or credit reporting agency. You can also file a formal administrative complaint with the Consumer Financial Protection Bureau or the Federal Trade Commission.
Who enforces the Fair Credit Billing Act?
The Consumer Financial Protection Bureau and the Federal Trade Commission, along with state attorneys general, enforce the Fair Credit Billing Act. Under the law, consumers may also bring civil suits against companies whose practices violate the FCBA.
What type of accounts does the Fair Credit Billing Act apply to?
The FCBA applies to “open end” consumer credit accounts, such as revolving charge cards and credit cards. However, the law does not apply to debit cards, installment loans, or business credit cards.
