Fair Credit Billing Act
What is the Fair Credit Billing Act?
Fair Credit Billing Act (FCBA) is a US federal law that protects consumers against billing errors and unauthorized charges on their statements. It gives cardholders the right to dispute charges with their and sets the procedures and deadlines both sides must follow to resolve a billing dispute.
Passed in 1974 as an amendment to the Truth in Lending Act, the FCBA applies to open-end credit accounts such as credit cards. It is implemented through Regulation Z and enforced by the Consumer Financial Protection Bureau (CFPB). The billing-dispute rights it created are the statutory foundation for much of today's credit card process.
Key requirements
The FCBA defines what counts as a billing error and the timeline for handling one. A billing error includes charges the cardholder didn't authorize, charges for the wrong amount, charges for goods or services that were never delivered or accepted, and arithmetic or accounting mistakes on the statement.
Core obligations under the act:
- Written dispute window: the cardholder must notify the issuer of a billing error in writing within 60 days of the statement date on which the error first appeared.
- Acknowledgment: the issuer must acknowledge the within 30 days of receiving it.
- Resolution deadline: the issuer must investigate and resolve the dispute within two complete billing cycles, and no later than 90 days.
- Payment hold: while the investigation is open, the issuer can't require payment on the disputed amount, charge interest on it, or report the account as delinquent for that amount.
- Unauthorized-use cap: a cardholder's liability for unauthorized charges is limited to $50.
These provisions map directly onto a chargeback: when an issuer reverses a disputed charge, it is exercising the dispute-resolution mechanism the FCBA established.
Who it applies to
The FCBA governs creditors that issue open-end credit – primarily credit card issuers – and it grants rights to the cardholders who hold those accounts. It applies to accounts in the United States.
Merchants aren't regulated by the FCBA directly, but they feel its effects through the chargeback system. When a cardholder files a billing-error dispute, the issuer initiates a chargeback against the merchant's , and the merchant must either accept the reversal or contest it with evidence. A that the merchant believes is unwarranted – for example, a customer disputing a purchase they actually made – still moves through this same statutory process, which is part of why is hard to challenge.
Penalties for non-compliance
An issuer that doesn't follow the FCBA's dispute procedures forfeits its right to collect the disputed amount and any related finance charges, up to $50, even if the charge later turns out to be valid.
Beyond that forfeiture, creditors face civil liability under the Truth in Lending Act's enforcement provisions, which can include the cardholder's actual damages, statutory damages, and court costs and attorney's fees. The CFPB supervises compliance and can bring enforcement actions for systematic violations.
For merchants, the direct cost of a billing dispute is the chargeback itself: lost revenue on the reversed sale, a chargeback fee from the acquirer, and possible placement in a card scheme monitoring program if disputes accumulate.
