There’s no guaranteed way of how to win credit card disputes, but understanding the process may help your odds.
Perhaps the most important credit card benefit is your protection against unauthorized and fraudulent purchases. If you’ve ever had a dispute over an authorized purchase with a debit card you realize how unpleasant that experience can be. That’s because it’s your money that’s been lost and not the bank’s. Even if that loss is only temporary, you may not have enough money in your account to pay bills.
With a credit card, the issuer’s money is on the line, which is why they will usually be willing to go to the mat with the retailer to rectify the situation and perform a charge back if necessary. However, the ball is very much in your court to alert them to unauthorized charges — regardless of whether it’s a simple error or outright fraud. In some cases card issuers will catch fraudulent charges using their fraud detection systems (like if your card is suddenly used in another state or incurs certain types or patterns of charges) but it’s best not to rely on this type of safeguard. Below we will go over some important things to know about disputing a credit card charge.
Know the difference between “billing errors” and “disputes of quality.” Understand that these are two totally different things and you have different rights for each. First, let’s talk about billing errors…
Dispute Rules For “Billing Errors”
The Fair Credit Billing Act (FCBA) applies to the following “billing errors” on credit cards:
- Unauthorized charges. (Sidenote: Federal law 15 U.S.C. § 1643 limits a cardholder’s liability to a maximum of $50 for unauthorized charges. That being said, most reputable credit card companies will waive that $50 and give you zero fraud liability.)
- Charges for goods and services you didn’t accept or weren’t delivered as agreed upon.
- Charges that have the incorrect amount or date.
- Charges incurred when payments/credits are not properly posted to your account – i.e. If you return an item and the credit never shows up on your account.
- Charges in which you ask for an explanation or written proof of purchase, along with a claimed error or request for clarification.
- Charges incurred due to the credit card company not mailing the statement to your current address. The change of address must have been provided in written form and the creditor must have received it at least 20 days before the billing cycle ended.
- Math errors
The FCBA credit card dispute rules and rights do not apply if you are disputing the quality of goods and services. So if you purchased something defective, it would not be considered a “billing error” (but we’ll talk about disputing the quality of goods and services a little bit later).
Dispute Process For “Billing Errors”
If you’re disputing credit card charges as a billing error, here’s an overview of the process….
Step One: Notify The Credit Card Company
You will you need to notify your creditor in writing in order to qualify for all of the above billing errors, except for “unauthorized charges” which can be reported over the phone (but it’s still highly recommended to also report them in writing, in case you have misclassified their category).
Generally speaking, disputes can be handled easily over the phone with most major credit card companies. However, since the FTC website says you must mail a letter in order to be covered, then you should do that… especially if it’s for a large dollar amount. Here is a credit card dispute letter sample.
When you mail the letter, make sure you send it to the “billing inquiries” department. This is probably a different address than where you mail your payments so call customer service to find out where you should send it.
There is a credit card dispute time limit! The letter has to be received by your creditor within 60 days after the first bill was generated which showed the error (but for “unauthorized charges” there reportedly is no time limit). If you send a letter, make copies (and copies of any receipts you included) and send it via certified mail with return receipt so you have proof it was sent.
Step Two: The Investigation Process Begins
Within 30 days of receiving your dispute, the credit card company must respond to you in writing to confirm they received it. If you choose to only make the complaint over the phone, you still should expect to receive the written confirmation in the mail. However, it usually arrives fairly quickly; within 7 to 10 days.
Once the complaint has been received the credit card company must resolve it within two billing cycles, which is typically 60 days. If for some unusual reason your billing cycle is longer, the maximum amount of time the process can take is 90 days.
During the credit card dispute process investigation, you will not be required to make payments or pay finance charges on the purchase(s) in question.
Step Three: The Investigation Concludes
The dispute will either be ruled in your favor or the merchants favor. Here’s what typically happens in each situation:
Ruled in your favor?
The credit card company will mail you a letter which states your billing error complaint is valid and the appropriate corrections to your account have been made. This includes permanently removing the actual charges, accrued interest charges, applicable late fees, etc. resulting from the disputed transaction.
Depending on the circumstances, the creditor may say you owe a portion of the disputed amount. For example, if you bought something for $100 and were charged twice ($200 total) and had disputed that entire amount, then the credit card company will probably come back and say you owe $100 of the disputed transaction.
In case you are found to be partially responsible, you will owe any applicable finance charges and fees that would have normally accrued (from date of purchase to the present) on whatever amount you’re responsible for.
Ruled in seller’s favor?
If the dispute process finds that the charge is valid (not a “billing error”) then you will be responsible for the full amount, plus any interest and fees that would have otherwise accrued. The letter will provide details explaining what you owe.
If you disagree with the decision, you do have the right to try and refute it. However to do so, the credit card dispute law states that you must respond in writing within 10 days after receiving the ruling.
Should you choose to refuse to pay the disputed amount, you can indicate that in your written response. However you should be aware that the credit card company will have the right to start the collections process after you tell them you won’t be paying. If it is reported to the credit bureau, legally they will be required to notate the fact that it’s money the customer doesn’t believe they owe.
Dispute Process For “Quality of Goods & Services”
As mentioned, if your complaint is about the quality of goods and services received, the above credit card dispute rules for “billing errors” will not apply. That being said, you will be entitled to other rights of protection if:
- The purchase is for $50 or higher and it was made within your home state or 100 miles of your billing address. (Note: In some states internet purchases made from your home would qualify).
- You have already made a “good faith effort” to try and resolve the problems with the seller
If both of the above circumstances apply, you are allowed to take the same legal action against your credit card company that you can take under state law against the seller (so in a nutshell, if the seller violated state laws which entitle you to remedies, then you can go after your card issuer for those same remedies).
Should your credit card issuer also happen be the seller, like in the case of some card-related service getting accidentally charged to your card (or if a special business relationship exists between the issuer and the seller) then the distance requirements and $50 threshold do not need to be met.
4 Things You Need To Keep In Mind
1. Document everything
It’s always a good idea to document everything very thoroughly. Keep multiple copies of all correspondences and receipts. Make a log of your phone calls. If communicating by mail, make sure it’s sent certified with return receipt so you have proof.
2. Remember pre-existing agreements
Judging from posts on the credit card message board, the #1 mistake often made is that people forget pre-existing agreements they have with the seller. You may have already signed away your rights to a dispute and not even know it.
For example, an increasingly common practice among contractors is to have their customers sign away their rights to credit card disputes when you hire them (this is very sneaky and should be a major red flag to not hire them). Later on when a customer files a dispute about the quality of service, the contractor weasels out of it by sending that signed agreement to the credit card company.
Even if you did unknowingly sign away your rights, it doesn’t automatically mean you will lose (depending on the circumstances and the state you live). But it very well could kill your dispute, so you should always avoid waiving this right.
3. “Unauthorized charges” probably offer the best protection
There have been disputes which were essentially the same (with the same seller) but one cardholder filed as an “unauthorized charge” and another filed as a different billing error. Despite that the circumstances were for all intents and purposes the same, only the man who filed as an unauthorized charge won.
Now this does not mean you should intentionally misrepresent the nature your dispute. But if it truly is an unauthorized charge, make sure it is filed as such. Sometimes, a rep may file it under some other billing error and that will change the way it is handled, since the credit card dispute rights will be different.
4. Penalties for the card issuer not following procedures
The credit card dispute laws must be followed by your card issuer.
- Complaints must be acknowledged past the 30 day time limit?
- Investigation must not take more than two billing cycles
- Card issuer can not threaten to report you to the credit bureaus for not paying while the dispute was still in process (that can only be done after).
Those are just a few examples. The bottom line is if the credit card issuer failed to follow the process (and you can prove that) then they may not collect the amount in dispute or any related finance charges, up to $50, even if the charges turn out to be correct.
It is also possible to sue the card issuer when they violate the Fair Credit Billing Act. If they’re found guilty, you may be awarded damages, plus 2x the finance charges accrued – as long as it’s between $100 and $1,000. Just bear in mind that most card issuers require their cardmembers to agree to binding arbitration in the case of an unresolved dispute. These types of provisions are typically buried in the cardmember agreement and/or within the online terms and conditions when applying for the card. If your account has such a provision you’ve essentially waived any right to sue the issuer and will have to go through the arbitration process to pursue relief. So, in other words, good luck with that.
Updated April 11, 2016