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Bankruptcy Newsletter

Settling Credit and Debit Disputes with the FCBA and EFTA

The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) were enacted by Congress as a means to protect consumers engaging in mainstream credit and debit card payment technology. The FCBA creates procedures and guidelines for the prompt resolution of billing and other disputes over credit accounts. The EFTA protects against unauthorized transactions and errors on debit accounts or other electronic transfers.

The Fair Credit Billing Act

The FCBA provides protection and procedures for consumers with lost or stolen credit cards or that have billing disputes with credit companies. This legislation only applies to “open-end” credit accounts, which include credit cards and revolving charge accounts (e.g., department store cards). The provisions of the FCBA do not apply to loans or extensions of credit repaid on a fixed schedule, nor do they exempt consumers from compliance with consistent state laws regarding billing practices.

Types of account problems covered by the FCBA include:

  • Lost or stolen credit cards (consumer liability is limited to $50)
  • Unauthorized charges (consumer liability is limited to $50)
  • Reporting the incorrect date or amount of a charge
  • Charges for goods or services not received
  • Charges questioned by a consumer, requiring explanation or proof of purchase
  • Computation or mathematical errors
  • Failure to post payments or other credits, such as for merchandise returns
  • Failure to send billing to the consumer’s current address, if proper 20-day notice of the change is given

Process for Exercising the FCBA Protections

To receive FCBA protection, consumers must send written notification to the creditor within 60 days of the erroneous billing statement. The creditor must acknowledge receipt of the letter within 30 days and resolve the dispute within two billing cycles, not to exceed 90 days.

During the investigation period, the consumer does not have to pay any amount in dispute and creditors may not take action to collect the disputed amount or report it as delinquent.

The Electronic Fund Transfer Act

The EFTA applies to all electronic fund transfers (EFTs) and provides protection and procedures for consumers who have experienced unauthorized withdrawals or accounting errors with their electronic accounts. “Electronic transactions” include those involving ATMs, debit cards, and home computers.

Types of account problems covered by the EFTA include:

  • EFTs that the account holder or other authorized user did not make
  • Incorrect EFTs
  • Omitted EFTs
  • Computational or bookkeeping errors
  • Failures to properly reflect EFTs
  • Receipts of incorrect amounts from electronic terminals
  • EFTs for which the account holder has requested an explanation or documentation because of a possible error

Process for Exercising the EFTA Protections

Protection for electronic transactions is slightly more limited than for credit transactions. For example, the EFTA provides consumers with a narrower window of time to respond to theft or unauthorized use of their electronic account information.

For protection against a billing error, the EFTA requires consumers to notify the financial institution within 60 days of the erroneous billing statement. The institution then has at least 45 days to investigate and must resolve the dispute within 90 days.

For protection against theft or unauthorized withdrawals, consumers must report the loss within two business days of discovering it in order to limit their liability to $50. Waiting longer than two days could render the consumer liable for the first $500, and if such a loss is not reported within 60 days of receiving the account statement, the consumer risks unlimited loss.

Resolution of any Dispute

After investigation, if the billing item was erroneous, the creditor or financial institution must credit the account and send a letter explaining the corrections. All finance charges, late fees, or other charges related to the error must also be removed from the account.

However, if it is determined that no error occurred, the creditor or financial institution must promptly send a letter explaining how much is owed and why. In the case of a credit account, if the consumer still disagrees, they have 10 days to respond. The consumer may still refuse to pay, but creditors may begin the collection process, and any report sent to a credit bureau must state that the charges are contested.

Remedies for Creditors’ Failure to Comply with FCBA

In the case of creditors, failure to comply with the FCBA, including abiding by the time deadlines, precludes collection of the disputed amount or any related finance charges up to $50, even if the bill is correct. The same penalty applies if the creditor threatens to, or does, report the failure to pay to anyone during the dispute period.

In all cases, the consumer may sue a creditor or financial institution for failure to comply with FCBA or EFTA procedures. If successful, the consumer could be awarded damages between $100 and $1,000. The court could also order that creditors or financial institutions pay attorneys’ fees and costs.

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