Credit card billing disputes routinely rank near the top of the Consumer Financial Protection Bureau’s most common complaints, and MasterCard alone reports about 15 million disputed charges each year. While that’s really no surprise given the propensity that financial institutions have shown for making a wide-range of mistakes as well as the increase in identity theft witnessed in recent years, it’s clearly worth knowing how to dispute credit card charges in case the need to do so should present itself in your financial life.
The ability to dispute credit card charges derives from the Fair Credit Billing Act of 1975 (FCBA), which was passed as an amendment to the Truth in Lending Act and specifies what charges are disputable, how the dispute process works, and the rights that consumers, merchants, and financial institutions have throughout.
You can find a detailed explanation of those topics and more below:
The need to dispute a credit card charge can result from a number of different factors and types of transactions, including:
- Getting billed twice for a single purchase
- Being charged the wrong amount
- Failure to credit a return
- Items that are either not delivered or are sent to the wrong address
- Items that were damaged in transit
- Services not provided as originally specified
- Purchases made as the result of unauthorized access to your credit card account
It’s important to note, however, that you can’t simply leverage the credit billing dispute process to avoid paying for purchases that you indeed made and received but simply don’t want to pay for. Credit card companies investigate disputed charges, and while they may give you the benefit of the doubt for a minor charge the first time you complain, they won’t be so lenient with big-ticket purchases or with subsequent complaints. You’ve heard the one about the boy who cried wolf, right?
The credit card dispute process can be broken down into a few clearly-defined steps, ranging from simply looking back at past receipts to launching a full-blown fraud investigation.
Step 1: Retrace Your Steps – If an unknown or inflated charge shows up on your credit card account, the first thing you should do is look back at your receipts and think carefully about the purchases you’ve made to ensure that the charge is actually unauthorized and not just an oversight on your part.
Step 2: Merchant Communication – If you’re sure that you didn’t actually make the purchase in question but you’ve previously done business with the particular merchant, give them a call. An honest mistake might have been made, and the retailer will probably remove the charge once it’s pointed out. For example, if you were charged twice for a recent meal at a restaurant that you frequent regularly, noting this mistake will likely result in it being rectified quickly.
However, if you have never been to the store from which the charge originates, then calling probably won’t be too helpful. If the merchant is at all culpable, you’ll just be tipping them off that you’re on to their scheme. And even if the charge is removed, that might just serve to mask more serious problems. Since you have never been a customer of the retailer in question, the odds of identity theft far outweigh those that the merchant made a mistake, after all.
Step 3: Contact Your Card Issuer – If you don’t get anywhere dealing with the merchant or you suspect the unknown charge to be fraudulent, contact your credit card company right away. Most major issuers include a “Dispute this Charge” link next to each transaction listed on your online statement, in addition to providing a customer service number on your paper statement, which means initiating a formal dispute is very easy to do.
After you begin the dispute process, the credit card company will likely review its own records as well as call both you and the merchant in question for information. Depending on the situation, both you and the merchant may be asked to provide documentation to support your case. It’s common for issuers to either remove the questionable transaction from your account or issue a temporary credit, pending the results of their investigation.
If the credit card company rules in your favor or finds that the charge in question is the result of fraud, it will be permanently removed from your account and you will not have to pay for it. All major credit card networks provide zero liability guarantees for unauthorized transactions. If they side with the merchant, the charge will be re-applied to your account and you will be liable for payment.
Step 4 (if necessary): Escalation – It’s likely that your dispute will be resolved before you get to this step, but even so it’s important to understand that you do have options remaining should the merchant and your credit card company be of little help. For starters, you can file complaints with the Consumer Financial Protection Bureau – the financial industry’s main regulatory body – and/or the Federal Trade Commission – which is charged with enforcing the Fair Credit Billing Act. You can even sue your credit card issuer for a violation of the FCBA, if necessary, but it hardly ever comes to that.
Having inaccurate or fraudulent charges on your credit card account can be nerve-racking, so it’s understandable why you’d want them removed as quickly as possible. Before we get into the timetables – both legal and practical – for this to occur, it’s important to note that the Fair Credit Billing Act limits your liability for unauthorized credit card charges to $50 and all major credit card companies have voluntarily extended $0 liability guarantees. This means that you will not be held responsible for purchases that you did not make if you report them promptly.
In most cases, a simple phone call to your creditor within 60 days of the first monthly statement containing the error(s) being made available will be sufficient, and you should expect the entire process to be resolved within a couple of weeks thereafter. In the meantime, the charges in question will typically be removed and you will not be required to pay for them, pending the results of the creditor’s investigation.
While it’s probably overkill, you can also send a letter to your credit card company’s billing inquiries address if you want written documentation of your fraud notification. This letter should be sent via certified mail and should contain your name, address, account number, the date and amount of the fraud in question, and any police reports pertaining to it. Your creditor must acknowledge your complaint in writing within 30 days of receiving it (unless the issue has already been rectified) and must then resolve the issue within 90 days of receipt of the letter.
Finally, it’s important to point out that while most people think of credit cards and debit cards bearing either the Visa or the MasterCard logo as being the same when it comes to fraud protection, debit cards are actually governed by the Electronic Fund Transfer Act. Different rules and reporting procedures therefore apply.
In order to maximize your chances of winning a credit card charge dispute, you must understand the legal dynamics that are in play as well as the implications for a given merchant or card issuer’s bottom line.
Timeframe: First of all, it’s important to note that you must dispute a charge within 60 days (i.e. two billing cycles) of it first appearing on your account statement. Otherwise, the credit card company won’t be required to investigate. Assuming that you file your dispute within that timeframe, your card issuer must acknowledge receipt of the dispute form within 30 days of receiving it and render a ruling within 90 days. A failure to abide by this timeline is grounds for a lawsuit under the FCBA.
Investigation Costs: Each consumer dispute costs a bank $10 -$40 to investigate, according to a study by the consulting firm First Annapolis. That’s important for two reasons: 1) card issuers may simply give you the benefit of the doubt for minor disputed charges; 2) they aren’t likely to react favorably if you try to pull a fast one.
Payment Processing Costs: High dispute rates lead to increased payment processing costs for merchants, as processing companies price liability into what they charge. As a result, a merchant who has dealt with a number of disputed charges in recent months is more likely to fight a consumer’s claims that a mistake was made on their bill.
Card Issuer Conflict of Interest: Discover and American Express simultaneously play the roles of card issuer and card network. As such, they have interests on both sides of a payment dispute, dealing directly with consumers and merchants. Discover and Amex are therefore more likely to be conflicted than most other card issuers, which offer cards on the Visa and MasterCard networks. That can, of course, lead to unpredictable results in a disputed charge case, especially since merchants can realistically threaten to stop accepting Discover and Amex cards – a move that would not be possible with Visa or MasterCard given their ubiquity.
It’s not uncommon for merchants and credit card companies to make billing mistakes. The Fair Credit Billing Act of 1975 created a process by which to dispute such errors and defined the rights of all parties involved. Depending on your situation, you may want to resolve the dispute directly with the merchant in question or initiate a formal investigation through your credit card company.
At the end of the day, given the fact that all major credit card issuers provide $0 liability guarantees to their customers and wish to promote credit card use without fear of the costly mistakes it can trigger, most dispute cases will be resolved in the consumer’s favor, as long as they are legitimate.