We take advantage of some of the protections that help us each day in our financial lives. Banks and financial institutions have to tell you much it costs to buy something using their products, for example. They also have to disclose any fees they charge.
Why? The Fair Credit Billing Act or the FCBA. The 1974 federal law gives consumers a wide range of rights that they did not have before. It helped consumers gain confidence that the financial system wasn’t out to take advantage of them.
Let’s take a look at what the FCBA is, what it does, and why it’s more important than ever.
The FCBA – Where did it come from?
While we think of many of the rights associated with the FCBA as a given nowadays, this wasn’t always the case. The idea that consumers should be able to effectively do their own shopping for financial products was truly an afterthought. Access to financial services for most of recorded history was considered only for the wealthy and privileged.
The Truth in Lending Act (TILA) established many of the protections we think of as standard today. TILA mandated the use of Annual Percentage Rate (APR) disclosures on financial instruments, allowing consumers to shop around and compare.
TILA also mandates many of the terms and disclosures that must come with financial products. It provides for fair and timely resolution of disputes between creditors and lenders.
Those disputes were codified in TILA. However, they were not fleshed out to the satisfaction of many congressional leaders and consumer advocates. Thus, in 1974, Congress passed the FCBA as an amendment to the TILA.
TILA provides broad protections under the law over financial products. However, the FCBA specifically deals with billing practices. It addresses the dispute mechanisms available to consumers of open-end credit like credit cards.
What does the FCBA do?
The FCBA makes a number of key changes to the TILA. It provides what we would now consider fundamental rights to consumers in relation to their credit accounts.
- Consumers have 60 days from the date at which they receive their credit card bill to dispute any charge over $50 on their bill. These include a product or service that the consumer did not receive, incorrect dates and payment amounts.
- Creditors have 30 days to acknowledge receipt of the dispute. They they have two billing cycles to conduct an investigation. During this period, the credit card issuer may not charge interest or assess fees in regards to any balance currently under dispute.
- If the creditor finds that the charge is invalid, they must correct it and refund any fees. If they find it’s legitimate, they have to explain why and provide documentation. The debtor can still dispute the charge. The creditor must include a note on the inquiry, but can still attempt to collect the debt.
- Creditors may dispute charges if their card was lost or stolen. They are subject to only $50 of any fraudulent charges made. If their card, however, was used by an authorized person for unauthorized purchases (i.e. your son is permitted to use your card but decides to buy a $500 video game system against your wishes) you are still responsible for the charge.
- If a consumer has a dispute with a merchant, the consumer can dispute the charge and ask the creditor to withhold payment.
Things to Know
- Only charges that are actually incorrect are eligible for this dispute mechanism. Repeatedly processing disputes, otherwise called chargebacks, can have a negative affect on your relationship with the credit card company in question.
- Fees and interest are still charged on any part of the balance not disputed. Keep this in mind as you will still have to make payments appropriately.
- Be sure to check your credit report, especially when logging disputes with creditors. Your report will often lag behind your actual spending. You’ll want to ensure that they remove the appropriate items from your report in a timely manner.
Why is the FCBA more important than ever?
The internet and automated banking have completely revolutionized the way we do business, make purchases and interact with our financial institutions. It’s far easier and faster to buy anything we want and even easier than ever before to return things we don’t.
However, with this kind of speed and access comes plenty of hiccups. Your credit card information is now more valuable than any time in history, since any thief could steal your card number and order things online essentially anonymously. At the same time, financial institutions have fewer and fewer staff to help consumers deal with issues, forcing them to online experiences that are often less than ideal.
The FCBA provides consumers with tools to fight back against fraudulent uses of their credit cards and to ensure that they continue to get top-notch service from credit card companies.