Credit Card Purchase Protection Law

Make sure you understand your credit card purchase and billing rights.

Consumers appreciate the convenience and flexibility of using credit cards, but those benefits come with risks and vulnerabilities. You may find that someone has used your personal account information without your permission or that you disagree with purchases and charges on your account. When you discover inaccurate, improper, or unfair charges on your credit card statement, two federal laws---the Truth in Lending Act and the Fair Credit Billing Act---provide you with credit card purchase protection.

The Facts

The Truth in Lending Act (TILA) limits your liability for charges due to unauthorized use of your credit card. Unauthorized use may occur when your card or account information is lost or stolen through identity theft, or when a relative or acquaintance uses your card without your permission.

Under the Fair Credit Billing Act (FCBA), you may file a billing error dispute if your statement contains incorrect or unfair information, such as a math error or unauthorized charges; or charges for goods or services that were defective, damaged, or that you returned or never received.

Unauthorized Charges Disputes

The Javelin Strategy & Research Center reports that in 2009, 11 million adults became victims of identity fraud---which includes fraudulent credit card purchases---the highest level since it began conducting the survey in 2003. If you notice unauthorized charges on your credit card, call the credit card issuer to report the charges promptly, and follow-up with a written notification. TILA ensures that you will not pay more than $50 of unauthorized charges. Once you notify the credit card issuer, it must remove all fraudulent charges, cancel the compromised account, open a new account and send you a new card.

Billing Error Disputes

To file a billing error dispute under the FCBA, write a letter to the credit card company within 60 days after it sends the first incorrect statement. In the letter, you must include your name, account number, the dollar amount of the item you are disputing and the reason you are disputing it. The credit card company must acknowledge receipt of the letter within 30 days, and correct the error or explain why it believes the information is not erroneous within the earlier of two billing cycles or 90 days.

If it does not correct the error to your satisfaction, you may contest the decision in writing within 10 days. You are not required to pay the disputed charges while the credit card company is investigating your complaint, although you must continue paying any undisputed charges. During the investigation, the credit card issuer cannot take any collection or legal action against you or report to a consumer reporting agency that you are delinquent, although it may report that you are disputing a charge.

Considerations

The authors of "Solve Your Money Troubles" suggest that if the credit card issuer does not correct your billing statement after you contest its decision, consider suing the issuer for a violation the FCBA. You may also file a complaint with the Federal Trade Commission or the U.S. Office of the Comptroller of the Currency.

Report unauthorized credit card use right away, or the issuer may question the legitimacy of your claim. In the case of unauthorized use by a relative or acquaintance, be prepared to provide ample and convincing proof of your claim. The Federal Trade Commission also recommends that if you become a victim of identity theft, you should file a police report, check your credit reports, and notify your creditors.

Misconceptions

Although debit cards often feature credit card logos, they do not carry the same protections as credit cards. Different laws that place greater liability and responsibility upon the consumer, such as the Electronic Fund Transfer Act, govern debit cards.

Credit card issuers may encourage consumers to purchase identity theft protection or insurance. The National Consumer Law Center notes that since you will not pay more than $50 for unauthorized charges on your credit card, paying for this protection is unnecessary.

References

• "2010 Identity Fraud Survey Report: Consumer Version"; Javelin Strategy & Research Center; February 2010
• "Money Troubles"; Robin Leonard and Margaret Reiter; 2009
• Federal Trade Commission: Fighting Back Against Identity Theft: About Identity Theft
• "Surviving Debt"; National Consumer Law Center; 2008

Resources

• The Office of the Comptroller of the Currency: Answers About Credit Cards
• Federal Trade Commission: Facts for Consumers: Electronic Banking