Suppose you buy a product, using your credit card, and find it is faulty, but the merchant refuses to take it back, replace it, or issue a refund. Now what? Here’s what the federal Fair Credit Billing Act (FCBA) says:
Once you have paid for the merchandise by paying your credit card bill, you lose your right to dispute the charge. But whatever you do, don’t just refuse to pay the credit card bill. If you do, you may be surprised to learn how fast your credit score can plummet from good to questionable. Plus, you’ll be dealing with a bill collector instead of your credit card issuer. It may not seem like it, but your credit card company wants to keep your business and will most likely help you resolve a dispute.
Do it Right
If your bill goes to collection, not only will your credit score probably drop, but bill collectors are subject to a different set of rules than your credit card company. Credit card purchases fall under the rules of the FCBA. If you have a legitimate dispute, these rules can work in your favor.
Here’s an Outline of the Steps You Must Take:
Determine if your purchase qualifies
According to the FCBA, the purchase must be for more than $50 and must have been made within your home state or within 100 miles of your address. Those are the rules, but many credit card issuers will help you with purchases made over the Internet, or that don’t otherwise fit the parameters. They do this to keep you happy, but they are entitled to refuse to help with claims outside these parameters if they choose.
Contact the merchant
First you must make a good faith attempt to work it out with the merchant. If you can, take the merchandise back to the store. Otherwise, call and talk to the manager.
Every step of the way, record dates, names, and notes on the conversation.
After talking to the merchant, if he or she will not issue a refund or replacement, send the merchant a certified letter, return receipt requested. Keep it short including the details of the purchase and the problem. Before you mail the letter, make at least two copies, one for your records, and one to send to the credit card company.
Notify your credit card company
Next contact the credit card issuer. Do this within 60 days of the date the bill was sent to you. This is necessary under the FCBA. In your letter to the issuer, include your credit card number, the closing date of the bill which includes the bad charge, a description of the charge, and the reasons for dispute. Ask the credit card company to withhold payment on this amount, in order to preserve your rights. Don’t forget to also send the copy of the dispute letter you sent to the merchant.
Mail this letter certified, return receipt requested, to the address for billing inquiries, not for payments. Also include a check to pay for the current amount due, minus the disputed charge. Otherwise, you could end up with a late payment, since credit card companies have 5 days to post payments if the payments are not sent directly to the payments address.
Now for the investigation
At this point, the credit card company will investigate the charges. Some will, upon receiving a dispute letter, issue a temporary credit, while the investigation continues. They do this to give you, their customer, and the benefit of the doubt.
At the end of the investigation, if the credit card company finds the merchant to be at fault, you will not have to pay the charge. Conversely, if you are found to be at fault, the charge will remain on your account, plus appropriate finance charges.
To summarize, the key is to follow the rules, act quickly, contact the credit card company, don’t pay the disputed charges until the dispute is settled, and document, document, document.