The Fair Credit Billing Act (FCBA), much like the Card Act, is an amendment to the Truth in Lending Act. It applies to all creditors and primarily encompasses the handling of billing errors, the crediting and allocation of payments, and the handling of credit balances, among other things. In this article, we will explain the requirements of the act and what actions will help you maintain compliance with the FCBA.

Billing errors

[12 CFR §1026.13(a), 15 USC 41 §1666]

In order to understand the rules regarding mistakes in billing, you first need to understand what a billing error is. According to the FCBA, a billing error is an item on or with a periodic statement that reflects:

1. An extension of credit that isn’t made to the consumer on the credit plan
2. An extension of credit that isn’t identified correctly  according to this regulation
3. An extension of credit for property or services that the consumer did not accept or was not delivered to the consumer as agreed
4. The creditor’s failure to credit a payment or other credit properly to the the consumer’s account
5. A computational or other error in accounting made by the creditor
6. An extension of credit that the consumer requests additional clarification for (including evidence)
7. The creditor’s failure to deliver a periodic statement to the consumer last known address if the address was received in writing within 20 days before the end of the statement’s billing cycle

Billing error notice

If a consumer believes that there has been a billing error, they need to send a written notice to their creditor’s disclosed address within 60 days after receiving the periodic statement that reflects the billing error. This notice should allow the creditor to identify the consumer’s name and account number and explain why the consumer believes a billing error exists (including the type, date, and amount of the error).

Error resolution

[12 CFR §1026.13(a), 15 USC 41 §1666]

If you have received a billing error notice, you need to give the consumer written notice of acknowledgment within 30 days of its receipt unless the you've already taken the appropriate resolution procedures. You then have two complete billing cycles (no longer the 90 days) after receiving the billing error notice to appropriately resolve the error.

Prior to the resolution of an error, the consumer doesn’t need to pay any portion of a required payment that is related to the disputed amount (this included charges). You can’t try to collect on the amount, even if the consumer is enrolled in an automatic payment plan, though this only applies if the error notice was received at least 3 days before the scheduled payment date. Creditors aren't allowed to make or threaten to make an adverse report about the consumer's credit standing as a result of the disputed amount. They also can’t accelerate any of the consumer’s indebtedness or restrict or close the consumer’s account.

However, you can:

• Take action to collect on any undisputed portion of the bill
• Deduct the disputed amount and related charges from the credit limit on the account
• Reflect a disputed amount and related charges on the periodic statement as long as they indicate payment of the disputed amount and related charges is not required pending resolution of the error

If you discover that the error did occur, then you need to correct the error and credit the consumer’s account with any disputed amount as applicable. Once that's done, a correction notice needs to be sent to the consumer within two billing cycles (no longer than 90 days) of your receipt of the billing error notice.

If you find that there was no billing error, or that the error was different from what the consumer asserted, you should send the consumer an explanation of the reasons you believe the alleged error is incorrect and provide documentary evidence. If a different billing error occurred than what was asserted, you should correct the error and credit the consumer’s account with any disputed amount as applicable.

Rights and duties after resolution

[12 CFR §1026.13(a), 15 USC 41 §1666]

1. If it has been determined that the consumer owes all or part of the disputed amount, a creditor needs to:
2. Notify the consumer in writing of when the payment is due and what portion of the disputed amount (and related charges) the consumer still owes
3. Allow any applicable time period during which the consumer can pay the due amount without incurring additional charges
4. If desired, report an account or amount as delinquent if it is still unpaid after the creditor has allowed the applicable time period or 10 days (whichever is longer) for the consumer to pay the amount
5. Not report the amount as delinquent if the amount remains unpaid if the creditor receives further written notice of dispute from the consumer unless the creditor
   1. Reports that the amount or account is in dispute
   2. Gives the consumer a written notice of the name and address of who the creditor makes the report to
   3. Reports any resolution of the reported delinquency to everyone the creditor made a report to

If the consumer reasserts substantially the same billing error, you are considered fully compliant with this section if you took the required actions originally.

In relation to Regulation E (EFTA)

[12 CFR §1026.13(i)]

A creditor should comply with Regulation E in regards to an extension of credit that involves an electronic fund transfer under an agreement between the consumer and the financial institution to extend credit if the consumer’s account is overdrawn or to maintain a specified minimum balance in the account. 

This applies unless it is in respect to a prepaid account. If there is a covered separate credit feature and an asset feature of a prepaid account, and both features are accessible by a hybrid prepaid-credit card, an extension of credit incident to an electronic fund transfer occurs when the card accesses funds from both features in a particular transaction.

Payments

[12 CFR §1026.10, 15 USC 41 §1666c]

Creditors need to credit a payment as of the day it is received unless a delay in crediting won’t cause any kind of charge. In general, you should specify reasonable requirements that most consumers would be able to conform to when making payments, such as:

• Requiring the account number or pay stub with a payment
• Setting reasonable cut-off times for payments delivered by mail, electronically, by phone, and in person. The cut-off time should be no earlier than 5:00 p.m. on the due date at the location specified by the creditor
• Specifying that: 
  • only checks or money orders should be sent by mail 
  • payments need to be made in U.S. dollars, or 
  • a particular address needs to be used for receiving payments

If, for any reason, you don't receive or accept payments by mail on a due date (ex. if the postal service doesn’t deliver mail on that date), you can’t treat the payment as late for any reason if it’s received on the next business day. This doesn’t apply to other payment methods, such as electronic or phone payments.

In-person payments

[12 CFR §1026.10, 15 USC 41 §1666c]

If a consumer makes a payment on a credit card account in person at a card issuer’s financial institution before that institution closes, that is considered the payment date. A card issuing financial institution can’t have a cut-off time earlier than the close of business for any payments made in person at any branch or office of the card issuer where payments are accepted.

Allocation of excess payments

[CARD Act p. 8, Sec. 164 (b); 12 CFR §1026.53(a), 15 USC 41 §1666c]

When the card issuer receives a payment from a cardholder that is higher than the minimum payment amount, the excess of the payment should be applied to the card balance (interest bucket) bearing the highest rate of interest first, then to the next highest interest rate, and so forth until the payment is exhausted.

However, if the consumer has a balance (bucket) with an deferred interest arrangement that they are not obligated to pay interest on if the balance is paid in full before the period expires, then any excess on a payment must be attributed to that balance (bucket) first if it is in the two billing cycles preceding the expiration of the period. Only once the balance (bucket) with deferred interest has been paid off should any remaining excess on the payment be distributed in the manner previously described.

Timing of credit card payments

[15 USC 41 §1666b]

Statements have to be mailed or delivered at least 21 days before the next due payment disclosed in the statement. A card issuer can't treat a minimum periodic payment that is received within 21 days after the periodic statement was mailed or delivered as late for any reason.

Grace periods

[15 USC 41 §1666b]

If there is a grace period on the account, the statement has to be mailed or delivered at least 21 days before the grace period expires. A creditor can't impose a finance charge as a result of the loss of a grace period if a payment is made that satisfies the terms of the grace period within 21 days of the periodic statement being mailed or delivered.

Changes by card issuer

[15 USC 41 §1666c]

If you, as the card issuer, make a change to the mailing address, office, or your procedures for handling payments, you can’t impose any late fees or finance charges for a payment that was delayed because of the change within 60 days after the date the change took effect.

Credit balances

[12 CFR §1026.11, 15 USC 41 §1666d]

Any time there’s a credit balance greater than $1 is created on a credit account, the creditor should:

1. Credit the amount to the consumer’s account
2. Refund any remaining credit balance within 7 business days after receiving a written request from the consumer
3. Make a “good faith effort” to either refund the consumer by cash, check, money order, or by credit to a deposit account if any part of the credit balance has remained in the account for more than 6 months (If you don’t know the consumer’s current location and can’t find it through their last known address or phone number, no further action is required)

Notification of returns and refunds

[15 USC 41 §1666e]

If a creditor (other than the card issuer) accepts a return or forgives a debt for services that should show as a credit to a consumer’s credit card account, that creditor should send a credit statement to the card issuer through the issuer’s normal channels for credit statements within 7 business days.
The card issuer should credit the amount of the refund to the consumer’s account within 3 business days. That doesn’t mean the refund has to be posted to the consumer’s account within 3 business days as long as the account is credited within that time period.

Creditors who give refunds to consumers who pay with cash must also give refunds to consumers who paid with a credit card unless they disclose that neither cash nor credit refunds are given at the time of the transaction.

Prohibited offsets

[15 USC 41 §1666h]

A card issuer can’t use a cardholder’s funds held in deposit with them to offset the cardholder’s indebtedness under their credit card plan (before or after credit card privileges are terminated). However, if you are a card issuer, you can obtain or enforce consensual security interests in the funds or a court order relating to the funds. You can also levy upon the funds.

Card issuers can still set up an automatic payment plan as long as it’s authorized in writing by the cardholder, but automatic periodic payments on such a plan can be made no more frequently than once per calendar month.

Claims and defenses

[15 USC 41 §1666i]

If a dispute about a property or service purchased with a credit card is not satisfactorily resolved by a person who honors the credit card, the cardholder can assert claims and defenses against the card issuer, who can withhold payment for the disputed property or services and any charges imposed on that amount up to the amount of the outstanding credit.

However, in order for this to apply, a good faith attempt should have been made by the cardholder to resolve the dispute with the person honoring the card, the amount of credit extended should be greater than $50, and the transaction needs to have occurred in the same state the cardholder lives in or within 100 miles of their address if not within the same state. These criteria don’t apply if the person honoring the credit card:

• Is the card issuer
• Is in any way controlled by the card issuer
• Is controlled by a third person that also controls the card issuer
• Controls the card issuer
• Is a franchised dealer of the card issuer’s products or services
  Obtained the order for the disputed transaction through a mail solicitation by the card issuer

  If the cardholder withholds payment as stated above, the card issuer can’t report that amount as delinquent until the dispute is settled or judgment is received.

   

State laws

[15 USC 41 §1666j]

If a dispute about a property or service purchased with a credit card is not satisfactorily resolved by a person who honors the credit card, the cardholder can assert claims and defenses against the card issuer, who can withhold payment for the disputed property or services and any charges imposed on that amount up to the amount of the outstanding credit.