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Updated on Wednesday, April 19, 2017
If you use credit cards, chances are at some point you’ll need to dispute a charge that appears on your statement for one reason or another. The good news is that this common practice has some pretty awesome guidelines and provisions protected under both state and federal laws.
Whether your dispute is straightforward or complicated, you’ll want to know the ins and outs of how the dispute process works so that it can ultimately work for you should you need it. The dispute process will help you get the best outcome in the case of billing errors, fraud, misrepresented products, or any other charge on your statement you believe you shouldn’t be responsible for.
When to Dispute a Charge on Your Account
The Fair Credit Billing Act (FCBA) protects consumers from unfair credit billing practices. This federal law also provides guidelines to both consumers and credit card issuers for dispute management and resolution. According to the FCBA, consumers can file disputes, according to the FCBA settlement procedures, for the following billing errors (list provided by the FTC website):
- Unauthorized charges. Federal law limits your responsibility for unauthorized charges to $50.
- Charges that list the wrong date or amount.
- Charges for goods and services you didn’t accept or that weren’t delivered as agreed.
- Math errors.
- Failure to post payments and other credits, like returns.
- Failure to send bills to your current address — assuming the creditor has your change of address, in writing, at least 20 days before the billing period ends.
- Charges for which you ask for an explanation or written proof of purchase, along with a claimed error or request for clarification.
There are additional FCBA provisions covering problems with the actual goods or services, aside from billing errors. This is known as the right to assert “claims and defenses.” In other words, the charge is correct, but the goods or services are not delivered as promised or described. This right can be exercised up to one year after purchase.
Under claims and defenses, the purchase has to be made within 100 miles of your current billing address and be more than $50, and you’ve got to make a “good faith” effort to resolve the dispute with the merchant first. The dollar and distance rules don’t apply if there is a special relationship between the buyer and seller or the purchase was made via internet, mail, or phone.
When you are initiating a dispute on this basis, make that clear with the credit card company so they’ll process the dispute accordingly. In this case, state laws may also play a part in determining what actions you can take against the merchant and the credit card issuer if the dispute is not resolved in your favor.
How to Dispute a Charge on Your Credit Card
The first thing you’ll want to do is determine if the charge is really an error. A little research will help you figure out if a charge is an error, fraudulent, or a purchase gone wrong. Some things to consider:
- Did you let someone use your card? Do you have an authorized user on your account? They may have made a purchase with it.
- Is it possible that someone obtained your information illegally and made a fraudulent charge on your card?
- Does the merchant use another company name that appears on your credit card statement? (For example, Binky Toys can appear as “TOY CORP” on your billing statement.)
- Did you read the fine print? You may have signed a contract with a merchant authorizing charges you were not aware of.
Once you determine there is an actual problem with your statement, you’ll want to figure out if the problem is with your credit card issuer or a merchant. The process can be slightly different if a merchant is involved or not.
If the charge is an error that doesn’t involve a merchant, like fraud or identity theft, then you can contact your credit card issuer directly. Though it’s best to document your dispute in writing, many card issuers will discuss the issue with you (and sometimes even resolve it) over the phone.
Nowadays, most major card issuers will allow you to log in to your account and file the dispute or initiate an inquiry about a charge online. If you don’t feel comfortable with any of these methods, you can use this sample dispute letter provided by the Federal Trade Commission (FTC) and begin the dispute process via mail.
If the charge involves a merchant whose goods or services were either defective, misrepresented, or not delivered as agreed, then you’ll want to contact them first. You can place a call to start the process, but it’s best to have things in writing. So an email or snail mail letter can either kick things off or confirm and reiterate what was discussed over the phone regarding the issue.
Many times, merchants will work with you because they want to keep their chargeback rates (credit card refunds due to errors and disputes) low. Merchants who have higher chargeback rates are deemed high risk by credit card processors and face higher penalties and processing rates which cut deeply into their bottom line. For this reason, try to settle with them before going to your credit card company with the problem.
If you can’t get an acceptable resolution from the merchant who charged your card, then it’s time to contact your credit card issuer. Just like the process outlined above for billing errors, you can choose to initiate the dispute via phone, internet portal, or mail.
In all your disputing, remember the timelines set forth by the Fair Credit Billing Act. If your problem is with a merchant, you’ve got up to a year to make a claim under “claims and defenses.”
For errors, your dispute correspondence has to be received by the credit card issuer no later than 60 days after the first statement containing the charge you are disputing. In either case, if you decide to send your correspondence via mail, it’s a good idea to send it certified with proof of delivery.
What Happens After You Initiate a Dispute
Under the FCBA, your card issuer has to acknowledge your complaint 30 days after receiving it (unless they resolve it before then). Sometimes, the dispute process is fairly straightforward and within a matter of minutes the dispute could be resolved in your favor. You’ll receive a credit on your statement and the issue is resolved.
You should also be aware that under the FCBA, you don’t actually have to pay the amount in dispute or any interest or any related late fees while the dispute is ongoing. Sometimes, the card issuer will even remove the charge under investigation right away. The bank has 90 days to investigate the issue and resolve it either in your favor or the merchant’s favor.
Keep in mind that you could be asked for supporting documentation to back up your dispute. This could include police reports, photos of a defective product, manufacturer claims and descriptions, tracking numbers, screenshots, and email correspondence.
This evidence will be gathered and checked against any evidence supplied from the merchant. Once the bank has concluded the investigation, you’ll receive a final ruling where the charge is either removed permanently or placed back onto your statement and becomes your responsibility to pay. You should also know that you may be responsible for interest and fees that accrue for a dispute you ultimately do not win.
What If Your Dispute Isn’t Approved
If finally, despite your best efforts, you’re deemed responsible for the disputed charge, you still have a few options. You could appeal the final decision with the credit card issuer within 10 days of the decision. Sometimes, the investigation could be reopened. Inform the bank that you’ve got new information they should consider.
If they still decline to reconsider or resolve in your favor, they can report your failure to pay to credit bureaus. If they do report this information, it must also state that you do not believe you owe the amount in question.
Another option is to take the merchant, your bank, or both parties to court. This can be costly, but for an amount that’s high enough, a court case could be justified. Be sure to check terms and conditions for both the merchant and the issuer, because you may have waived your right to this course of action in doing business with them. Also, state laws will have a say in what legal recourse is available to you against both the merchant and credit card company. Check with the consumer protection division of your state’s attorney general office for guidance in this area.
Also, don’t be afraid to engage help and organizations that might have oversight of the institutions involved in your dispute. You can file a complaint against credit issuers with the FTC. The FTC complaint process, however, won’t apply to banks. Banks are regulated by the FDIC. You can find the regulator that has oversight of the bank you are dealing with here, or you can file a complaint with the Federal Reserve Consumer Help website.
If you’ve got the time, energy, and ambition, you can always take to social media to vent and tell the world about your experience. Many companies are diligent about protecting their online reputation and prefer to route these conversations offline for resolution. If possible, be just as polite and diplomatic on social media channels as you would be with a phone call or written complaint. You’ll likely get further with this approach.
Where It Can Get Sticky
As mentioned, disputes can be settled quickly and easy. Some people say that their card issuer didn’t even ask for documentation but charges were immediately reversed. Other times, it can be a longer process, especially if a merchant objects to your dispute.
When this happens, there can be a lot of back-and-forth between everyone involved in a credit dispute. The purchaser, the merchant, the acquirer (Visa, MasterCard, American Express, Discover), and the issuing bank all have to coordinate communication to make sure disputes are investigated thoroughly and resolved appropriately.
Be aware that there are circumstances that can complicate, delay, and even hinder the dispute procedures.
When a merchant doesn’t deliver goods or services due to insolvency, there may not actually be any money in their bank’s account to cover a chargeback. You might be better off filing a case in small claims court. Sadly, in many bankruptcy proceedings, outstanding payables due to customers are one of the last payment priorities.
Though the dispute can be resolved in your favor from the credit issuer, the merchant could come back and bill you anyway. They can even send your account into collections. In this case, keep your documentation and be ready for a potential battle with collection agencies that have been engaged to recoup the funds from you. You credit report could also suffer.
Let’s say you make an advance payment on a fitness camp 12 months in advance, but the company goes out of business and won’t be hosting the camp after all. You’ll want to make sure that you fully understand the dispute resolution process regarding future purchases. It will vary for each card issuer, so find out how you are protected in a situation like this. Consult your bank’s card member agreement and speak with someone who can give you clarity on dispute terms before making advanced payments with your credit card.
If the dispute is resolved in your favor, part of the resolution may be connected to returning goods in order to receive the refund amount. There are very clear rules around what merchants must do when they receive your goods — a credit must be transmitted to the card issuer within seven days. From there, the issuer must ensure it shows up on your account within three days. It’s not unheard of for a seller to “send” for an item and never retrieve it in order to delay or avoid issuing a refund. Make sure that you take responsibility for returning goods. It’s a good idea to pay for tracking and insurance to make sure your items arrive safely, with proof of delivery, to the seller.
Terms and conditions are no fun to read, but it’s a good practice to look at the fine print (especially for large purchases). Hidden in these terms could be strict refund policies and even waivers to the dispute process should a problem occur with a sale.
Instructions for Filing Disputes with Major Credit Card Issuers:
|Card Issuer:||Instructions for Disputes:|
|Chase||Chase dispute instructions|
|Bank of America||Bank of America dispute instructions|
|Capital One||Capital One dispute instructions|
|Barclays||Barclays dispute instructions|
|Discover||Discover dispute instructions|
|Citi||Citi dispute instructions|
|American Express||American Express dispute instructions|
Final Thoughts on Credit Card Instructions
There are so many variables that can influence the outcome in all of these cases that it can seem like the final decisions are arbitrary. What worked in one scenario may not work in another with a different company or cardholder.
Many times, you’ll be working with a customer service representative who is unfamiliar with your rights as a consumer and the laws that should govern the outcomes of credit card charge disputes. When all else fails, research, education, and persistence may be your most powerful weapons in the fight for your consumer rights.