Credit Cards

The short version

Credit cards are a common way to pay for goods and services, but sometimes problems arise with charges or payments. Federal laws, like the Truth in Lending Act (TILA), give you specific rights when disputing billing errors or dealing with credit card debt. Understanding these rules can help protect you from unfair charges and manage your financial obligations effectively. This lesson explains your rights regarding credit card disputes and how to address them.

The law this is built on

Every point below comes from the authority named next to it. Verify the current text before relying on it.

15 U.S.C. § 1637
This section of the Truth in Lending Act (TILA) generally requires credit card issuers to provide clear disclosures about the terms and conditions of credit card accounts. It ensures you know key information like interest rates, fees, and how finance charges are calculated.
Why it matters: This law helps you understand your credit card agreement and compare different offers before you commit, promoting transparency in credit card lending.
15 U.S.C. § 1666
This section outlines the procedures for resolving billing errors on open-end credit accounts, like credit cards. It defines what counts as a 'billing error' and sets forth your rights and the credit card company's obligations when such an error is reported.
Why it matters: This law gives you a clear process to dispute incorrect or unauthorized charges and protects you from having to pay them while they are under investigation.

Words you need to know

Billing Error: Under 15 U.S.C. § 1666(b), a billing error can include charges for unauthorized purchases, charges for goods or services you didn't accept or that weren't delivered as agreed, incorrect amounts, computational errors, or charges you need more explanation about.
Dispute: This is when you formally challenge a charge or an item on your credit card statement. You initiate a dispute by notifying your credit card issuer of a billing error.
Chargeback: A chargeback is the process where your credit card company reverses a transaction, returning funds to your account. This typically happens after a successful dispute of a billing error.
Creditor: The financial institution or company that issued your credit card. They are responsible for investigating billing errors you report.
Truth in Lending Act (TILA): A federal law, 15 U.S.C. § 1601 et seq., designed to protect you in credit transactions. It requires lenders to disclose credit terms clearly and gives you rights regarding billing errors and credit card disputes.
Open-End Credit: A type of credit where you can borrow money repeatedly up to a certain limit, pay it back, and then borrow again. Credit cards are a common example of open-end credit.

Your rights

✓You have the right to dispute billing errors on your credit card statement. (15 U.S.C. § 1666)
✓Your credit card company must investigate your dispute if you follow the correct procedures. (15 U.S.C. § 1666)
✓You do not have to pay the disputed amount (or any finance charges related to it) while it is being investigated. (15 U.S.C. § 1666(c))
✓Your credit card company cannot report you as delinquent for the disputed amount during the investigation. (15 U.S.C. § 1666(d))
✓If the billing error is confirmed, the creditor must correct your account and credit back any excess charges and finance charges. (15 U.S.C. § 1666(a)(C))
✓If the billing error is determined not to have occurred, the creditor must explain why and provide documentation. (15 U.S.C. § 1666(a)(B)(ii))

How the process actually works

1
Identify the error
Regularly
Review your credit card statement carefully for any unauthorized charges, incorrect amounts, or charges for items you didn't receive or agree to. (15 U.S.C. § 1666(b))
2
Write a dispute letter
Within 60 days of the statement showing the error
Send a written notice to your credit card company at the address provided for 'billing inquiries.' Clearly explain the billing error and why you believe it is wrong. Include your account number. (15 U.S.C. § 1666(a))
3
Creditor acknowledges dispute
Within 30 days of receiving your letter
Your credit card company must acknowledge your written dispute. This tells you they received your claim and are starting the process. (15 U.S.C. § 1666(a)(A))
4
Investigation begins
After acknowledgment, continues until resolution
The credit card company investigates the disputed charge. During this time, you do not have to pay the disputed amount or any finance charges on it. (15 U.S.C. § 1666(c))
5
Resolution and notification
Within two complete billing cycles (but not more than 90 days) after receiving your letter
The credit card company must either correct the error and notify you, or explain why they believe the charge is correct and provide documentation. (15 U.S.C. § 1666(a)(B))
6
Account adjustment (if error found)
After the investigation concludes
If an error is found, the company must correct your account and credit any amounts you were overcharged, plus any related finance charges. (15 U.S.C. § 1666(a)(C))

Deadlines that can end your case

Report a billing error
Within 60 days
You must send your written notice within 60 days after the first statement containing the billing error was sent to you. If you miss this deadline, you may lose your protections under federal law. (15 U.S.C. § 1666(a))
Creditor acknowledgement
30 days
The creditor must acknowledge your written dispute within 30 days of receiving it. If they miss this, they have violated federal law. (15 U.S.C. § 1666(a)(A))
Creditor resolution
Two complete billing cycles (max 90 days)
The creditor must resolve the dispute (correct the error or explain why it's not an error) within two complete billing cycles or 90 days, whichever is shorter. Missing this deadline is a violation. (15 U.S.C. § 1666(a)(B))

Costly mistakes

✕Not checking your credit card statements regularly for errors.
✕Not sending a dispute in writing; verbal disputes may not trigger federal protections. (15 U.S.C. § 1666(a))
✕Missing the 60-day deadline to report a billing error. This can significantly reduce your rights. (15 U.S.C. § 1666(a))
✕Paying the disputed amount while it's under investigation, as this can make it harder to get your money back.
✕Throwing away receipts or documentation related to purchases; these can be crucial evidence in a dispute.
✕Using the disputed credit card for new purchases before the dispute is resolved, if the credit limit is affected by the disputed amount.

Your checklist

Review your credit card statements monthly for any suspicious or incorrect charges.
Gather any supporting documents, like receipts, order confirmations, or cancellation numbers for the disputed item.
Draft a letter clearly explaining the billing error, citing the date, amount, and reason for the dispute.
Include your credit card account number in the letter.
Mail the letter to the specific 'billing inquiries' address listed on your statement, not the payment address.
Send the letter by certified mail with a return receipt requested to prove it was sent and received.
Keep copies of your dispute letter and any other correspondence with the credit card company.
Do not pay the disputed amount or its associated finance charges while the investigation is ongoing.

Common questions

What happens if my credit card company doesn't respond to my dispute?

Under 15 U.S.C. § 1666(a)(A), your creditor must acknowledge your written dispute within 30 days of receiving it. If they fail to do so, or fail to resolve the issue within two billing cycles (max 90 days), they have violated federal law. You can report this to a regulatory agency like the Consumer Financial Protection Bureau (CFPB).

Can my credit score be harmed if I dispute a charge?

No, if you follow the correct dispute procedures outlined in 15 U.S.C. § 1666, your credit card company cannot report you as delinquent for the disputed amount while it's under investigation. Your credit rating should not be negatively affected solely because you've initiated a legitimate dispute.

What if the credit card company says the charge is valid, but I still disagree?

If the credit card company determines the charge is valid, they must provide you with a written explanation and copies of relevant documents. If you still believe they are wrong, you can notify them within 10 days that you refuse to pay, but they can then try to collect the debt and report it to credit bureaus. You might then consider filing a complaint with a regulatory body or seeking legal advice. (15 U.S.C. § 1666(a)(B)(ii))

Does this law apply to debit card transactions?

No, 15 U.S.C. § 1666 specifically applies to 'open-end credit plans' like credit cards. Debit card disputes are covered under a different federal law, the Electronic Fund Transfer Act (EFTA), which has similar but distinct protections and timelines.

How this changes by state

While federal law (15 U.S.C. § 1666) provides a baseline for credit card billing error rights, some states offer additional protections or have their own laws regarding consumer credit. These state laws might extend deadlines, broaden the definition of a 'billing error,' or provide stronger remedies than federal law. To find your state's specific rules, you can check your state's attorney general's office website or consumer protection agency.

When you need a lawyer

You should consider contacting a lawyer if your credit card company refuses to investigate your dispute, fails to follow the deadlines, or reports you to credit bureaus for a disputed amount during the investigation, especially after you've sent a formal written dispute. A lawyer can also help if the amount disputed is very large, or if you believe the company is engaging in unfair or deceptive practices beyond a single billing error.

Do this today

→Review your most recent credit card statement for any unfamiliar or incorrect charges.
→If you find an error, locate the 'billing inquiries' address on your statement.
→Write a clear letter outlining the error and send it via certified mail with return receipt requested.
→Keep meticulous records of all communications and documents related to your dispute.
→Familiarize yourself with the full text of 15 U.S.C. § 1666 for a comprehensive understanding of your rights.

This lesson is legal information for educational purposes only, based on 15 U.S.C. § 1637 (TILA); 15 U.S.C. § 1666. It is not legal advice and does not create an attorney-client relationship.