Getting reimbursed for credit card billing errors

(First of two parts)

When ITN reader Winnie Baffa forfeited her payments after she was unable to attend her March ’07 holiday package in Spain (Dec. ’07, pg. 37), she contacted her credit card company to obtain reimbursement for some of her expenses.

She was turned down, however, and sent a letter to the Editor of ITN, who asked me to research the matter of reimbursement for a missed or canceled cruise or tour.

The Fair Credit Billing Act

Compensation for this type of missed opportunity or cancellation is covered under the Fair Credit Billing Act (FCBA).

This is a federal law, ratified in 1986 as an amendment to the 1968 “Truth in Lending Act,” which protects consumers from unfair billing practices and gives them the right to dispute errors on their credit card statement. You will find details on the website www.consumeraction.gov/caw_credit_billing_disputes.shtml.

Below are summaries of important aspects of the website.

The FCBA defines billing errors as, among others things, incorrect credits for payments, charges in the wrong amount or unauthorized ones, charges for goods or services that you did not receive (for instance, a tour or cruise that was canceled) or that were not as promised or goods that were damaged on delivery or were defective.

The FCBA applies to “open-end” credit accounts, such as credit cards, and revolving charge accounts, such as those in a department store or issued by an oil company. It does not cover installment contracts, such as car and major appliance payments. Neither does it apply to personal loans or extensions of credit you repay on a fixed schedule.

In the following discourse, the word “creditor” will refer to both the credit card company and the firm using revolving charge accounts.

So what recourse do you have?

To get redress under the law, you have to write to the credit card company within 60 days of the postmark of the first bill with the disputed charge. Unfortunately, this 60-day limit isn’t very helpful when you have paid for a tour a year in advance.

Fortunately, however, as I waded through the legal morass of the law, I came across the following statement: “IF MORE THAN 60 DAYS HAVE PASSED BUT YOU JUST RECENTLY FOUND THE PROBLEM, YOU MAY STILL BE ABLE TO DISPUTE THE CHARGE.”

“Aha!,” I wondered. “What did that word ‘may’ mean? Could you dispute the charge or couldn’t you?”

Calling all banks!

To get clarification about disputing charges beyond the 60-day limit, I called the credit-card divisions of several banks and received the following information.

US Bank told me that within 60 days after receiving the billing error in your credit card statement, you have to send a written request to the proper department of its credit-card division. This division will research the matter and act as a mediator in the dispute with the merchant, while following Visa’s or MasterCard’s guidelines. If the dispute process comes out in your favor, you will get reimbursed.

“What if the vendor has gone bankrupt?” I asked.

“If you have a good claim, you still will get reimbursed. Visa has insurance to cover these kinds of conditions,” I was told. However, it becomes more difficult for US Bank to mediate claims going beyond six months as their electronic system holds records dating back only six months.

A Citigroup, Inc., spokesperson informed me, “Although the Fair Credit Billing Act states that the time frame for reporting disputed charges is 60 days, we recognize that unique circumstances can sometimes prevent a customer from reaching out to us in time. We encourage our cardholders to call us with any issues they may have, as historically we have been willing to work with customers who dispute charges past the 60-day time frame.”

Bank of America’s response was quite terse. It informed me that the bank usually will not touch any billing errors over 60 days. It certainly doesn’t hurt to ask the bank for consideration of your problem, however.

Chargeback

To correct billing errors, the creditor company usually executes a chargeback, which is the reversal of a transaction from a consumer’s card to the merchant’s account. Chargebacks, domestic as well as international, are permitted under Visa’s and MasterCard’s rules. (I did not investigate other cards.)

FCBA requirements in a dispute

To challenge a billing error on your credit card, the FCBA requires you to do the following:

• Write to the credit card issuer at the address for “billing inquiries,” which commonly is found on the back of your monthly statement. Don’t write to the address where you send your payment.

• It is important to send the letter to the correct company. In the case of Visa and MasterCard, you should send it to the bank that issued the card.

• Be specific. In your letter, give your name, address and account number, the date and amount of the charge disputed, and a complete explanation of why you are disputing the charge. Include copies (not originals) of sales slips or other documents that support your position. Keep copies of all correspondence.

• Send your letter so that it reaches the creditor no later than 60 days after the first bill containing the error was mailed to you.

• Send your letter by certified mail, return receipt requested, which will give you proof that the creditor received your inquiry.

• If you follow these requirements, the creditor must acknowledge your letter in writing within 30 days of receiving it and conduct an investigation within 90 days. The creditor must resolve the dispute within two billing cycles (but not more than 90 days) after receiving your letter.

• The creditor may send you a standard form to fill out or you can use the template (see illustration above).

While the bill is being investigated, you do not have to pay the disputed amount. The creditor cannot try to collect this amount, nor can the company report your nonpayment as late, nor can it close or restrict your account. The creditor may not threaten your credit rating in any way.

• If there was an error, the creditor must credit your account and remove any related finance charges or late fees. For any amount still due, you have the right to an explanation and copies of documents proving you owe the money.

• If the bill is correct, you must be told in writing the amount you owe (including finance charges) and why. If you disagree with the result of the investigation, you may write to the creditor, but you must act within 10 days after receiving the explanation, and you may indicate that you refuse to pay the disputed amount.

Any creditor that fails to follow the settlement procedure may not collect the disputed amount, or any related finance charges, up to $50, even if the bill turns out to be correct.

Suing the credit card company

You can sue a creditor who violates the FCBA. If you win, you may be awarded damages, plus twice the amount of any finance charge, as long as the damage is between $100 and $1,000. The court also may order the creditor to pay your attorney’s fees and costs.

If possible, hire a lawyer who is willing to accept the amount awarded to you by the court as the entire fee for representing you. Some attorneys may not take your case unless you agree to pay their fee — win or lose — or they may add to the court-awarded amount if they think it’s too low.

Reporting FCBA violations

If you do not get satisfactory results after presenting your case to the creditor, you can call the Federal Trade Commission (FTC) for further help at 877/FTC-HELP (877/382-4357) or visit ftc.gov.

Next month, I will continue my essay with a discussion of the resolution of a dispute about the quality of goods or services, something that is not considered a billing error. ITN

Dr. Wagenaar welcomes questions but may not be able to answer them individually. Write to him at 6556 50th Ave. NE, Seattle, WA 98115, or e‑mail [email protected].