What is the Fair Credit Billing Act (FCBA)?

Billing mistakes could affect an individual’s credit in the long term, so the Fair Credit Billing Act (FCBA) was created to protect consumers from billing errors and unfair billing practices common with certain types of credit.

Originally an amendment to the 1974 Truth in Lending Act (TILA), the FCBA is a federal law that defines billing errors and provides guidance for lenders and consumers on how to deal with them. The law can also protect consumers in the case of a dispute. 

Read on to learn more about the guidelines set forth by the FCBA.

Key takeaways

• The Fair Credit Billing Act (FCBA) is an amendment to the Truth in Lending Act (TILA) and protects consumers from unfair billing practices.
• The FCBA helps protect consumers with open-end credit accounts, like credit cards, by allowing them to dispute billing errors.
• If the consumer’s dispute is successful, their bill will be revised, which sometimes includes a credit for the dispute charge or a portion of it.

The FCBA covers billing errors on open-ended or revolving accounts. These include credit cards, charge cards and home equity lines of credit (HELOC). The law doesn’t cover debit transactions or installment loans, like auto loans, that give borrowers a set period of time to pay off their debt. But other laws provide consumers with protections for those sorts of things.

Examples of billing errors covered under FCBA

The FCBA covers an array of billing errors. Examples of billing errors covered under the FCBA include:

• Unauthorized charges on a consumer’s billing statement
• A billing statement that doesn’t accurately reflect the date or the amount of a transaction
• Accounting errors made by a creditor
• Not sending a billing statement, when required, to the borrower or other requirements
• Charges for items that were purchased but not received
• Charges for goods or services a borrower rejected or that weren’t supplied as promised
• Absence of a statement credit for merchandise a consumer returned, or failure to credit a payment a borrower made

The FCBA doesn’t cover complaints about the quality of goods or services delivered by a merchant. And disputing a billing error under the FCBA isn’t the same as requesting a refund because of disagreements about policies or service or canceled plans.

The FCBA created a standard process for consumers to dispute billing errors without harming their credit. The process is different for creditors versus consumers.

Consumer responsibilities under the FCBA

If a consumer wants to dispute a billing error under the FCBA, they need to notify the creditor in writing within 60 days of when the billing statement was sent—even if they attempted to resolve the matter with the merchant. It may be faster for the consumer to contact the merchant directly to let them know why they think there’s an error. And some creditors may ask the consumer to do that first. 

The Federal Trade Commission (FTC) has a sample letter consumers can use to notify the creditor in writing, but generally, the dispute letter should include:

• Name
• Account number
• A brief description of the suspected billing error
• The date of the potential error
• The amount of the potential error 

It’s a good idea for the consumer to submit copies of receipts or other documents that they think will support their claim. And they might want to hang onto a copy of the letter and the supporting documents.

Dispute letters should typically be sent to the address listed for billing inquiries, not the address for making payments. That address can often be found on the back of the billing statement. In the meantime, borrowers should keep paying all other portions of the bill that they aren’t disputing. Borrowers typically aren’t obligated to pay the disputed charge—or any related charges—while they’re waiting for a creditor to respond to their dispute.

Creditor responsibilities under the FCBA

The FCBA sets notice and timing requirements for creditors.

The FCBA requires the creditor to acknowledge a dispute letter within 30 days of receiving it or correct the error as the consumer requests. And the creditor must investigate and resolve the dispute within two complete billing cycles—but no more than 90 days—of receiving the letter. During this time period, the creditor can’t collect the disputed amount or report it to credit bureaus as late. If the creditor determines there was no error, the borrower will be notified of the amount of money owed and the due date.

If the borrower disagrees with the creditor’s decision, they can send a response. But if the borrower hasn’t made a payment within 10 days of having likely received the creditor’s notification, the creditor may still report their account as delinquent. This may not occur until at least 10 days after the creditor sends notification.

The Fair Credit Reporting Act (FCRA) is a law that involves credit reports. Both the FCBA and FCRA protect consumers, but they do so in different ways. The FCBA applies to billing errors, while the FCRA helps ensure that borrowers’ credit reports have fair, accurate information and that their information is protected, among other things. 

The FCBA can be a key tool for protecting credit consumers. If you know your rights under the FCBA, you may be able to fix potential billing errors and save yourself money. Regularly monitoring your credit can help you spot potential issues. You can check individual charges by going over your monthly statement. And you can use CreditWise from Capital One to keep an eye on the bigger picture, including free access to your credit score. You can also get free copies of your credit reports from AnnualCreditReport.com.