Who Is Liable For Credit Card Fraud
In many cases, the consumer will not be on the hook for much. The Federal Fair Credit Billing Act protects consumers, stating that a card issuer can only hold a cardholder liable for up to $50 in fraudulent charges if the physical card is lost or stolen. If the card number is used but the cardholder is still in possession of the actual card, their liability is $0.
The bank will require the merchant to refund payment and the bank will subsequently charge a fee or chargeback to the merchant.
Its important to note that the rules are different for debit cards. The Electronic Fund Transfer Act states that if fraud is reported within two days of the statement date, consumer liability is limited to $50. If the fraud is reported after two days but within 60 days, their liability is limited to $500. After 60 days the consumer is responsible for any and all fraudulent transactions.
How merchants handle their end of investigating unauthorized transactions can have a significant impact on how they are perceived by customers.
What Does Dispute A Charge Mean
In a credit card transaction, disputing a charge;is a situation in which a customer questions the validity of a transaction that was applied to their account. Credit card dispute can happen for reasons including
- Unauthorized or fraudulent charges
- Failure by the merchant to deliver merchandise
- Defective merchandise
- Billing errors
Complaints about the quality of a product or service dont qualify as billing error disputes and they dont get the same protections under the law. To open a credit card dispute, you send a letter explaining the situation along with copies of receipts or other evidence you have to your credit card company.
How To Dispute Unauthorized Or Fraudulent Charges
The credit card company can decide you owe the disputed amount when theres a disagreement between you and a merchant over a charge you agreed to. But in a case where you didnt authorize the charge, there is more protection available for you. If your credit card was stolen and then used to make purchases, the company cant make you pay more than $50 of the unauthorized amount, as the Federal Trade Commission explains. And if only the card number was stolen, so that you are still holding on to the physical card, youre not obligated to pay any unauthorized charges.
Finally, the law limits what you owe if your credit card company doesnt follow the procedures mandated by the Fair Credit Billing Act. Thus, if your credit card issuer tries to collect a charge while its investigating or violates the act in any other way, you should contact the Federal Trade Commission.
Need a helpful visual guide to how credit card dispute works? Weve created a that walks you through the process and highlights both your rights and your responsibilities when disputing a charge with a creditor.
The CESI Team is committed to helping you reach your financial goals. If debt keeps you from living the life you dream of, contact us for a free debt analysis today and get started on the road to a brighter future!
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When To Dispute A Charge
While there are protections in place to help consumers dispute inaccurate charges on their , those protections have limits. For example, if youre experiencing buyers remorse over an expensive purchase or you wish youd chosen the bigger flat-screen TV, youre probably out of luck.
On the other hand, if you bought a new TV but were charged more than once for it, then you might have a case to dispute those extra charges. Heres a list of scenarios when you may be able to dispute a charge on your credit card.
- You were charged for purchases you didnt make
- You were charged for items you bought but never received
- You didnt receive a credit for an item you returned
- The amount you were charged for a purchase you made was incorrect
What If My Credit Report Dispute Is Not Resolved
If a credit bureau doesnt resolve your disputes, it can mean several things:
- the original information providers who reported the item were able to prove its accuracy to the credit reporting agencies
- the information that was investigated was incomplete
- the credit reporting agencies have deemed your dispute frivolous and wont pursue it
- or the CRCs are being lazy and refusing to look into the matter. There are a few things you can still do.
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What Are The Different Types Of Fraud
Before we go further, lets review some fraud terminology:
- True fraud is when a fraudster steals a cardholders payment card credentials and uses them to make a purchase without their knowledge or permission.
- Friendly fraud, also known as chargeback fraud or , is when a cardholder disputes a transaction and receives a chargeback based on false claims.
- Family fraud is when someone known to the cardholder uses their card without permission, and the cardholder disputes the charge as an unauthorized transaction.
- A dispute is when a cardholder asks their bank for a chargeback on a transaction that they did authorize. Disputes should only be granted for very specific cases where the merchant has made a billing error or failed to uphold their terms of purchase with the cardholder.
Note that in the case of true fraud, the cardholder is the victim, whereas in the case of friendly and family fraud, the cardholder is actually defrauding the merchant.
What To Do If You Have Questions Regarding A Bank Charge
A Bank charge is a charge on your account statement that is not from a merchant. Examples of Bank charges can include :
- Standard or promotional interest rate charges
- Account fees fees, over credit limit fees, annual fees)
- Transaction fees
If you have any questions or inquiries regarding a Bank charge on your account statement, please contact MBNA customer service at 1-888-876-6262, Monday to Sunday 7 a.m. to 12 a.m. EST.
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How Long Does A Credit Card Dispute Take
How long will it take to resolve a dispute? The time it takes to resolve your dispute depends on the type of dispute and the merchant, but it may take up to 60 days for credit card disputes and 90 days for debit card disputes. Keep in mind, disputes are often resolved more quickly if you contact the merchant first.
What Does A Credit Card Company Do When You Dispute A Charge
Disputing a charge does not have an impact on your credit. You must keep paying your credit card bill like normal during the dispute process. As mentioned previously, card issuers usually remove disputed charges from the bill until the dispute is resolved, but youre still responsible for paying the rest of the bill.
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Paying For Disputed Charges
For claims that fall under the FCBA dispute process, you may not have to pay the disputed charge while the credit card company investigates your claim, and the card issuer cant try to collect payment from you for it. But youre still responsible for paying other charges that are not disputed.
During the investigation, the card issuer can deduct the amount of the charge youre disputing from your available credit limit. For example, if your credit limit is $10,000 and youre disputing a $1,000 charge, you may only have access to $9,000 worth of credit while the company investigates the disputed charge.
When the investigation is complete, the credit card company must send the results to you in writing. If the company finds an error, the amount must be , along with any related finance charges. But if the card issuer decides the charges were accurate, youll be responsible for paying the disputed amount, including any finance charges that accrued while the disputed charge was being investigated.
If you dont agree with the creditors findings, you have 10 days from receiving the explanation to write to the creditor and let it know youre not going to pay. If you choose not to pay, the creditor has the right to start collection proceedings.
If you dont pay the disputed charge and the card issuer reports your account as delinquent to the credit bureaus, it must include a statement that explains that you dont believe youre responsible for paying the disputed amount.
How Do Banks Conduct Their Investigation
After you have placed your request for a refund, the bank conducts their investigation. The general method that is followed when Banks Investigate Disputes on Debit Cards goes as below:
- The bank will contact the merchant and tell them about your case. If your case is strong and you have provided the necessary proofthe Bank will ask the merchant to give you your rightful money back.
- The bank will also guide you and tell you about the chargebackreason code as per to your situation.
- If the merchant denies giving the refund then the case will be taken to the federal Consumer Financial Protection Bureau .
- Otherwise, you will get your refund in about 7-10 business days.
- In case, the bank decides you will not get the money back then again you can go to the CFPB.
- The Consumer Financial Protection Bureau will get to the bank and ask for their investigation report and the proof provided by you.
- After the complete analysis of your complaint, if your case holds your entire claim then you will get your money refunded.
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What Happens If A Dispute Is Denied
If your dispute is denied, then the charge will go back on your . You’re legally entitled to an explanation about why your dispute was denied and how you can appeal the decision. Your credit card company will likely send you both the explanation and instructions on how to appeal in writing.
An appeal gives you another opportunity to provide evidence and win the dispute. If that doesn’t work, you can also try filing a complaint with the Consumer Financial Protection Bureau. As a last resort, you can hire a lawyer, although the cost involved means this option won’t be worth it for most disputes.
What The Company Cant Do During The Investigation
The Fair Credit Billing Act regulates what the company can do while its investigating:
- It cant try to collect the amount thats in dispute or the interest on that charge, although you still have to pay the part of your bill thats not under investigation.
- Its not allowed to close your account.
- It cant report you to the credit bureaus for failing to pay the disputed charge.
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Seeking Legal Redress From Credit Bureaus
It is your right to seek a legal remedy when they wont work with you according to the rules and guidelines established by law.
When faced with a potential consumer lawsuit, the credit bureau might find it easier to remove the information from your credit report and fix your credit history, but youll need to have a good case.
You can let them know you will sue for non-compliance under section 616 of the FCRA. Or you might be able to sue for defamation. Let them know youve been talking to an attorney and that you know your rights.
You might need to contact a lawyer to send an intent to sue letter. Finally, you can also file a complaint with the Federal Trade Commission.
The Bank Makes A Decision
After completing the investigation as stipulated by the law, i.e., Federal Trade Commission , the credit card issuer decides to file a chargeback on the customers behalf or reject the inquiry. They will notify the customer of their decision via mail or online account with an explanation.
If the bank determines that the said transaction is a fraudulent charge, they can contact the authorities. If the signs suggest a large pattern , The US Federal Bureau of Investigations may get involved. In several cases, the bank handles the situation on its own through its internal fraud team.
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How To Dispute A Credit Card Charge For Bad Service Or Services Not Rendered
The Fair Credit Billing Act a federal law passed in 1975 gives you the right to dispute charges in case you are dissatisfied with the transaction through a process called Claims and Defenses. You must file a report on a disputed purchase within 60 days of the statement date on which the charge appeared. Before you officially report your issue, the law requires you to try and work out the disagreement directly with the merchant. See if they are willing to provide you with a refund or some sort of store credit.
Try to save documentation that proves you attempted to resolve the issue. This can be an email exchange, or a witness to you speaking with the merchant. If this route fails, you can turn to Claims and Defenses.
It is important that you do not pay for the disputed credit card charge. Contact your issuer immediately and inform them that you are working on resolving the issue. During the course of the investigation, your creditor may lower your credit limit proportionally to the amount being disputed. For example, if you are challenging a $500 credit card purchase and your credit limit is $2,000, the creditor may set your credit limit to $1,500 while that purchase is investigated. Additionally, complaints about the quality of goods and services can only be made if the following are satisfied:
Dispute Credit Card Charge Sample Letter:
Dear Sir or Madam:
When Merchants Or Banks Pay
This can get tricky and could come down to whether the fraudulent transaction involved an actual card called “card-present” fraud or just the credit card number, called “card-not-present” fraud. Examples are a card dipped into a payment-card reader in a retail store versus paying for an online transaction by typing in a credit card number.
Generally, the bank is more likely to be liable for the fraud for card-present transactions, while the merchant might get stuck with the cost for transactions without a physical card.
The bank is more likely to be liable for the fraud for card-present transactions, while the merchant might get stuck with the cost for transactions without a physical card.
The rules on liability are dictated by the credit card network the transaction used, such as Visa, Mastercard, American Express or Discover.
And there are additional internal system costs for disputing the fraudulent charge called a chargeback. That could mean that regardless of liability, the bank, for example, could make a business decision not to pursue reimbursement for fraud from the merchant and simply absorb the cost.
In addition, major credit card issuers typically banks have many fraud-related business costs other than reimbursing the customer for a fraudulent purchase. They pay to operate fraud departments, employ customer service representatives to answer fraud calls from consumers and incur the cost to replace compromised cards with new ones, for example.
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That Doesnt Sound Promising
If your claim is denied the first time around, there are a few things you can do.
First, ensure you have all your ducks in a row. Have copies of everything and keep detailed notes of your interactions with the bureaus. If possible, get evidence from the lender in question. If an entry or inquiry truly is an error, they may be willing to help you.
Did you receive a denial the first time around, you can appeal and a have a customer service representative actually review your application. If its approved, theyll delete the entry. If not, you may have to report the inaccuracy to a government agency like the Consumer Financial Protection Bureau to get the entry removed.
Pursuing Disputes And Investigations Further
To pursue the matter further, its your right to request information on the method the credit bureau used to obtain their verification, as well as the details of said verification.
You can find more about this procedure in section 611 of the FCRA, which states:
Treatment of Inaccurate or Unverifiable Information In general. If, after any reinvestigation under paragraph of any information disputed by a consumer, an item of the information is found to be inaccurate or incomplete or cannot be verified, the consumer reporting agency shall promptly delete that item of information from the file of the consumer, or modify that item of information, as appropriate, based on the results of the reinvestigation; and promptly notify the provider of the information that the information has been modified or deleted from the file of the consumer.
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The Fraud Investigation Process
When a cardholder disputes a charge, the issuer is expected to examine the details of the case and make a fair, impartial judgment to determine liability. The card networks have extensive and complex guidelines for this, and these rules determine how banks investigate disputes for the relevant card brand.
1. The customer makes a complaint:
The buyer might claim that the merchandise never arrived, or didnt live up to expectations. The buyer could also claim the transaction was not authorized.
2. The bank gathers evidence:
The bank examines relevant information about the transaction to determine fault. .
3. The bank examines the transaction:
The bank is responsible for reviewing the transaction data as it related to the customers claim, then evaluating whether the claim is reasonable.
4. The bank makes a decision:
The issuer decides to either reject the inquiry or file a chargeback on the customers behalf.
To illustrate, lets look at how this process would work with a cardholder and issuer both based in the US . Once the bank receives the cardholders inquiry, Federal Trade Commission rules give them 30 days to acknowledge the customers claim. In an effort to provide better service to customers, though, banks will generally move quickly on disputes.