Billing Dispute and Your Credit

Billing dispute or billing error - Don't let it ruin your credit!

If you are being billed for something that is incorrect, you don't want to pay for it, of course. But unless you handle things in exactly the right way, your refusals to pay could show up as bad marks on your credit report.  Fortunately, the Fair Credit Billing Act lays out specific procedures for you and the creditor to follow.

You must...

Write to the creditor (at the address they list for billing inquiries) within 60 days of the date the first incorrect billing was mailed. Indicate:

  • Your name
  • Your account number;
  • Indicate you believe the bill contains an error, and why it is wrong
  • Indicate the date and amount of the error or the item you want explained.

It is best to use certified mail and request a return receipt. Keep copies of everything.

Pay all parts of the bill that are not in dispute.  You do not have to pay the disputed item, or the minimum payments and finance charges that apply to it while waiting for an answer.
The creditor must... Resolve your problem, or (at least) acknowledge your letter within 30 days.
After receipt of your letter, and while resolving the dispute, a creditor is forbidden to..
  • Threaten your credit rating 
  • Give information to other creditors or credit bureaus that would hurt your credit reputation.
  • Take any action to collect the disputed amount
Within 90 days (or two billing periods, if less than 90 days)
  • Your account must be corrected, and you owe no finance charges on the amount that was wrong. You must be sent an explanation of any amount you still owe. 
  • Or, the creditor must tell the reasons why they believe the bill is correct and provide a statement of what you owe. It may include finance charges that have accumulated and minimum payments you missed while questioning the bill. 
If the bill was correct (according to the creditor's response) you must... Pay the balance due. You have the normal amount of time to pay. (You have at least 10 days before you must to pay.) If you do not pay in the time allowed, you may be reported as delinquent and the creditor may take action to collect.

You may write to the creditor to indicate your disagreement with the findings. If so, the creditor has additional responsibilities. 

If (in writing) you challenged the creditor's findings, the creditor must... Give you the the name and address of credit reporting agencies and other persons to which the creditor has reported information about your account.* 
The creditor must report to them that you have challenged your bill.
When the matter is settled, the creditor must report the outcome to them.
(*You may contact these credit reporting agencies to have your side of the story added to your credit record.) 

The Fair Credit Billing Act (and its dispute settlement procedures) apply only to "open end" credit accounts, such as credit cards, revolving charge accounts (like department store accounts) and overdraft checking accounts. It does not cover installment contracts: loans or extensions of credit you repay on a fixed schedule, such as car loans, personal loans, furniture and major appliance installment  financing.

Here are the types of billing errors the Fair Credit Billing Act is intended to address:

Types of Billing Errors

  • A charge for something you didn't buy
  • A charge for a purchase made by someone not authorized to use your account. (Your responsibility for unauthorized charges is limited to a maximum of $50.)
  • A charge that is not properly identified on your bill
  • A charge for an amount different from the actual purchase price
  • A charge entered on a date different from the purchase date
  • A charge for something that you did not accept when delivered
  • A charge for something not delivered according to agreement.
  • A bill with an error in the arithmetic
  • A bill failing to show a payment, return, or other credit to your account.
  • A bill in which you were charged twice for the same item.
  • A bill mailed to the wrong address, when you've notified them of an address change at least 20 days before the end of the billing period
  • A questionable item, or an item for which you need more information.

Be sure to check your credit report reasonably soon going through dispute settlement procedure. If the creditor did not follow the rules of the Fair Credit Billing Act, they may not collect the amount in dispute, or any related finance charges, up to $50, even if the bill turns out to be correct. Thus, if your credit report shows late payments (for the disputed item) during the dispute period, the creditor can be penalized for improper reporting - and these "late payments" can be removed.

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