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Disputing Credit Card Charges

This is the time of year when most of us receive our post-holiday credit card statements, and many of us may discover mistakes.

On The Saturday Early Show, personal financial advisor Ray Martin provided some tips to help us get through the process of disputing a credit card charge.

January is the perfect time to review your credit card charges, says Martin. The holidays are prime-time for pulling out credit cards -- and the more charges you make, the more chances there are for a mistake.

Martin explains consumers are protected from billing errors under the Fair Credit Billing Act. But few people understand what the law actually entails. While it can help you clear up disputes, Martin says there are certain guidelines and timelines people need to follow.

Martin emphasizes the following procedures or protections do not apply to debit cards. Shoppers use their debit cards like credit cards these days -- some debit cards even carry Mastercard and Visa logos. Martin says some debit card issuers do offer protections, but the most complete protections are offered only to credit card users.

The following type of billing errors can be cleared up with a simple phone call instead of an official dispute:

  • Clerical Errors: Mistakes such as math errors, incorrect dates or amounts charged can be easily changed over the phone.
  • Unfamiliar charges: More than half of all disputes arise from consumers not recognizing a charge. Usually, this is not a false charge. Instead, the merchant's corporate name is displayed on the bill in place of the individual store name. People looking for a charge from a particular store will be confused by an unfamiliar corporate name. For example, a local carwash outside of Boston called "Brite Way Car Wash" showed up on Ray's bill as "Verc Enterprises."
  • Fraud: If a truly fraudulent charge does appear on your bill, companies are typically quick to fix the problem because they want to maintain your faith in their card's security. If you suspect identity theft, Martin says you should close your account immediately.

    Other billing problems or errors may potentially be handled over the phone as well. However, it may be a safer to write a letter stating you are disputing the charges. Errors might include unauthorized charges such as a charge from an Internet service provider you have since canceled, charges tacked on by the creditor such as insurance or other services they sell and you don't want, a failure to credit returned items to your account, or goods that you ordered and that never arrived.

    Consumers mistakenly believe they also can automatically get a refund for poor-quality products. Unfortunately, Martin says, that's not the case.

    Goods "not delivered as agreed" are covered by the law and can be disputed for a refund. But, poor-quality goods are not covered by the law. That's because poor-quality goods are not seen as an "error" on your bill. If you hope to receive a refund, you must return the product and then frame your dispute as being about a product or service that wasn't delivered as agreed. Martin says this may seem like a fine line, but this is your best bet for getting your money back, according to Consumer Reports and others experts.

    When disputing a credit card charge, you need to be sure and follow the correct procedures.

    First, when you write a letter to dispute charges , do not send it to the same address where you send your payments. Instead, Martin says to turn your statement over and search the fine print for the "billing inquiries" address and use that.

    In your letter, include your name, address, account number and a clear description of the error. Include copies of documents that support your claim. Be sure to keep the originals for your own records; also keep a copy of your dispute letter.

    Send the letter by certified mail, return receipt requested.

    The letter must reach the credit card issuer within 60 days after you receive the erroneous bill.

    Martin says you should always dispute a charge via letter if there is a lot of money at stake, or if you are close to missing your 60-day deadline.

    Once you've completed these steps, the burden lies with the credit card issuer. The company must acknowledge your complaint in writing within 30 days of receiving your dispute letter. Then, the card issuer is bound to resolve the dispute within two billing cycles.

    Martin says all of this sounds fairly easy, but working through the process can potentially take up to five or six billing cycles. During that time, you'll continue to receive bills, which claim you not only owe the disputed amount, but you also owe a growing finance charge on the amount. Many people worry about that growing charge, and wonder how this is going to affect their credit rating.

    Martin says it is within your rights to withhold payment on the disputed charge and the finance charges during the investigation. (But regular billing rules apply to all other charges and finance charges.) The credit card issuer is not allowed to try and collect this money, your account cannot be closed or restricted, and the issuer cannot report you as delinquent to a credit agency. The amount in dispute, however, will lower your credit limit by that amount until the disagreement is cleared up.

    Assuming that the card issuer agrees with your dispute and finds that your bill is indeed incorrect, expect to receive a letter detailing the error and what corrections will be made to your account. The creditor must remove all finance charges, late fees or other charges related to the error.

    If it turns out that your bill was correct, you will receive a letter explaining what you owe and why. You may write back saying that you refuse to pay the amount; however, the creditor can now begin the collection process. This includes reporting you to a credit bureau.

    Martin says you should know the law only requires a "reasonable" investigation into the dispute, not an exhaustive one. The creditor will probably not go so far as to check store security camera footage when tracking down a disputed charge, for instance.

    "The good news is that it's in a credit-card company's interest to fix most problems fast," Consumer Reports writes in its February issue. "It costs at least $25 to process a dispute, so it's cheaper simply to credit you for small amounts without an investigation. ... For larger disputes, credit-card issuers also probably weigh whether you'll take the matter to court or cut up your card (it can cost more than $200 to replace you)."

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