Consumer Protection Topics - Billing Errors and Resolution
Billing Errors and Resolution Basics
If you use a credit card, you may have experienced some type of billing error, such as an unauthorized charge, a charge listed on your monthly account statement with the wrong date or amount, charges for goods that weren’t delivered as agreed, or the card issuer’s failure to post payments or other credits. If you have a deposit account and debit card, you may have also noticed errors involving electronic fund transfers from your account or a point-of-sale purchase with your debit card. Luckily, federal laws provide a means for correcting these types of account errors so long as the financial institution involved is notified in a timely manner.
Consumer Protections Available
The Truth in Lending Act (TILA), as implemented by Regulation Z, provides a billing error dispute process for open-end credit, such as credit cards. In order to take advantage of the protections offered by Regulation Z, you must notify the lender of any billing errors by:
- providing the notice in writing,
- enabling the lender to identify your name and account number,
- stating why you believe there is a billing error,
- including the type, date, and amount of the error, and
- sending the notice in a timely manner so that the lender receives it, at the address specified for billing inquiries, no later than 60 days after the lender sent the first billing statement reflecting the error.
Once you properly notify the lender about an error on your statement, it must acknowledge that it received this notification within 30 days, unless the problem has been resolved. The lender must investigate and resolve the issue within two complete billing cycles (but in no event later than 90 days) after receiving the billing error notice.
While the lender conducts its investigation into the billing error:
- You may withhold payment of the disputed amount and related charges (but any part of the bill not in question, including finance charges on undisputed amounts must be paid in accordance with account terms).
- The lender may not take legal or collection action on the disputed amount.
- The lender may not report your account as delinquent, accelerate your debt, restrict your account, or close your account.
If the lender confirms there is a billing error on your account, it must send you a written explanation of the corrections made to your account. In addition to crediting your account for the disputed amount, the lender must also remove all finance charges, late fees, or other charges related to the error. If the investigation reveals no error occurred, it must send you a written explanation of the amount you owe, and you are responsible for paying the disputed amount, plus any finance charges that accumulated during the investigation.
You may request copies of relevant documents used in the lender’s investigation. If you disagree with the results of the investigation, you may write to the lender within 10 days after receiving the explanation, and you may indicate that you refuse to pay the disputed amount. The lender may begin collection procedures and may report your account as delinquent to credit reporting agencies, but it must also note that you disagree with the amount owed.
In addition to the consumer protections associated with billing errors, Regulation Z also contains special credit card provisions that limit your liability for unauthorized use of a credit card. A credit card holder’s liability is limited to $50 for unauthorized use before the cardholder notifies the card issuer. Notification may be given in person, by telephone, or in writing.
The Electronic Fund Transfer Act (EFTA), as implemented by Regulation E, provides basic protections for consumers with electronic direct deposits or who use debit cards to access their deposit account held directly or indirectly at a bank. These protections include timeframes by which a bank must investigate and determine whether an error occurred when you notify your bank of an error and, in some cases, requirements to provide provisional credit while the investigation is performed.
For example, if you notify your bank of a potential account error, Regulation E requires a bank to investigate and determine whether an error occurred within 10 business days of receiving your notice (or 20 business days for new accounts). If a bank is unable to complete its investigation within the appropriate timeframe, it may take up to 45 days to determine whether an error occurred. But in these cases, banks must generally provide consumers with a provisional credit to their account within 10 days of the bank receiving the error notice. Also, banks must notify consumers about the provisional credit within two days of providing the credit.
Some banks may require you to submit an error notice in writing after you provide notice orally. If the bank does not receive written confirmation within 10 business days of receiving the initial notice of an error, the bank is not required to provide provisional credit. The time period for the investigation may be extended to 90 days if the error involved an electronic transfer initiated outside of the United States, a point-of-sale debit card transaction, or a transaction involving a new account within 30 days of being opened.
If the bank determines there is an error on your account, it must correct the error within one business day after confirming it and report the results to you within three business days after completing its investigation (including, if applicable, notice that a provisional credit has been made final).
If a bank determines that no error occurred or that an error occurred in a manner or amount different from that described in your notice, the bank must send a written explanation of its findings and note your right to request the documents the bank relied on for its investigation. When the bank debits the funds provisionally credited to your account during the investigation, it must provide you with the date and amount debited. In addition, the bank must inform you that it will honor checks, drafts, or similar instruments payable to third parties and preauthorized transfers from your account (without charge as a result of an overdraft) for five business days after the notification.