12. What is the “Fair Credit Billing Act”?
The Fair Credit Billing Act (FCBA) was passed as an amendment to TILA with the purpose of protecting consumers against unfair billing practices. The FCBA is administered by FTC and applies within the consumer’s home state or 100 miles of home. These provisions are enforced against banks and other financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). The primary protections of the FCBA limit liability on lost, stolen, or misused credit cards to $50. It also establishes a method for consumers to address billing errors in open-end accounts, such as credit cards and lines of credit. Further, it allows the credit card holder to assert a defense against paying a merchant for shoddy or defective merchandise.
Methods of Disputing a Debt
Consumers have authority under the FCBA to dispute errors in open-end accounts. To dispute a bill on the account, the consumer must send written notice to the creditor within 60 days of receipt of the account statement containing the error. There are provisions in place to make certain notice is sent to the correct department. The creditor must acknowledge receipt of the dispute within 30 days. The creditor must then investigate the dispute. This generally means undertaking simple substantiation measures with the individual paid by the account, such as a vendor or service provider. The creditor must either correct the disputed debt or explain to the debtor why it believes the debt is valid. The consumer may request all information collected to substantiate the debt.
Enforcement of FCBA
Enforcement of the FCBA is done through private action. That is, failure of a financial institution to adhere to these provisions gives a consumer the ability to bring a private action against the creditor. The FCBA allows for actual damages, statutory damages of twice the finance charges, court costs, and attorney’s fees.
• Discussion: Why do you think federal law provides these consumer protections for clients of federally insured institutions? Should these provisions apply outside of just federally insured institutions? Do you think the procedure for disputing a debt is sufficient to protect consumers?
• Practice Question: Mandy has a credit card with 1st Federal Bank and Trust. She generally makes certain that the charges on the card draft automatically from her bank account every month. One day, when reviewing her credit card statement, she notices a series of unexplained charges. She now wants to dispute these charges? What information do you need to know to determine if Mandy is protected from having to pay the charges?