One of the more aggravating scenarios as a credit card holder is when an unauthorized, or incorrect charge finds its way on your billing statement. It can happen for a host of reasons, such as fraud, incorrect merchant batch processing, or simply an honest mistake keyed in by an employee. Regardless, the process of disputing a credit card purchase can seem futile with the number of rules, regulations and deadlines that must be followed. I worked in a fraud and disputes area for a major credit card processor for a couple years. During my time there I saw many legitimate claims rejected because cardholders did not follow instructions for disputing a charge. Below is a guide that should help guide credit card users through the maze of dispute procedures to ensure their cardholder rights are protected.
Contact the Merchant Immediately
If you find that a merchant has erroneously overcharged your account, or charged your account in error, contact them immediately and ask for credit. If the merchant refuses to take care of the situation, explain that you are preparing to dispute the charge with your card issuer. Merchant banks don’t like receiving tons of disputes against a merchant, so many times merchants are willing to cooperate to stay off their bank’s bad list. Don’t give them too much time, however, as the clock is ticking on your own deadline to submit a written dispute.
Get in Writing
Some issuers now allow disputes by telephone or website contact, but I would still advise cardholders to submit a written letter of dispute. This written letter protects your cardholder rights against an issuer claiming to have never received your phone call. It is worth the additional cost to send the letter certified mail, return receipt requested, so you have proof of submission and receipt.
Include Your Story
For straightforward disputes such as “Don’t recognize the charge,” or “Unauthorized purchase” it may be enough to simply complete the dispute form on the back of your billing statement, or via your online account. However, for more complex situations involving travel or entertainment, or quality of goods or services received, it is best to include a brief letter providing background. Be sure to include a timeline (to the best you can remember), and any names of agents from companies referenced in your letter. This letter will be attached to the dispute paperwork forwarded to the merchant’s bank, and is a requirement for these types of disputed charges.
Know Your Rights
Disputed credit card purchases are covered under Regulation Z of the Fair Credit Billing Act. Interest may not accrue on disputed charges, and you cannot be reported delinquent for refusing to pay a charge that has been properly disputed with the card issuer in writing. However, this does not mean you do not have to pay minimum payments for the remaining portion of your balance.
Things Move Slowly
Here are the most important deadlines to remember when submitting a dispute:
- Cardholders have 60 days from the date of the statement in which the original transaction appears to submit in writing a formal letter of dispute
- Issuers (banks, credit card companies, etc.) have 30 days from the day they receive your letter of dispute to place the item in dispute, charge the item back to the merchant and provide a temporary credit to your account (this is called a “chargeback”), or provide you with information proving it is your charge.
- The merchant’s bank, upon receiving a chargeback, has 45 days to represent the item to the issuing bank with further proof that the charge is correct. At this point the cardholder’s bank can either issue a 2nd chargeback providing more details, or place the charge back on the customer’s account.
- If the merchant’s bank is still in disagreement after receiving a second chargeback a case for arbitration is filed and both parties make their case to a 3rd party for resolution.
- If your bank is unwilling to process a 2nd chargeback and places the representment back on your account you may have to pursue legal action against the merchant in a small claims setting. Depending on the amount of the charge this may or may not be worth the time and money required.