Return to Consumer Information

The State of California - State and Consumer Services Agency

LEGAL AFFAIRS
400 R Street, Suite 3090
Sacramento, CA 95814-6200

HOW TO CORRECT A CREDIT CARD BILLING ERROR

November 2000

A federal "billing-error law" can help you in these kinds of situations involving use of a credit card:

• Your monthly statement includes a $17.50 purchase that you or your spouse didn't make.
  
  
• Your statement does not give you credit for a payment you made.
  
  
• Your statement includes a debit for a purchase that you didn't accept.
  
  
• Your statement includes a debit or credit that is not identified.
  
  
• Your statement contains an accounting error; the figures just don't add up.
  
  
• Your statement reflects an extension of credit for which you want additional clarification or documentary evidence.

These are all examples of "billing errors" that a credit card issuer must correct if it receives proper written notice of the error within the required time.

Your Billing Error Correction Rights

To enjoy the benefits of the credit card "billing-error law," you must:

• Notify the card issuer in writing no later than 60 days after the card issuer mails you the first periodic statement that includes the disputed charge; and
  
  
• Include your name and account number in the letter, telegram or other written communication that you send to the card issuer; and
  
  
• Include the type, date, and amount of the error in the letter, telegram or other written communication that you send to the card issuer; and
  
  
• Ensure that the card issuer receives your billing-error notice within 60 days after the card issuer transmits the first periodic statement that reflects the error.

Once the card issuer receives your written notice of the billing error (your "billing-error notice"), the card issuer must do each of the following:

• First: Either correct the error, or mail or give you a written acknowledgment of receipt of the notice within 30 days after receiving it, and
  
  
• Second: Within two complete billing cycles, decide whether it believes that an error occurred and take appropriate action.
  
  

The card issuer must then do one of the following:

• First: If the card issuer believes a billing error occurred: correct the billing error, correct your account with any disputed amount and related finance or other charges, and mail you a correction notice, or
  
  
• Second: If the card issuer, after conducting a reasonable investigation, determines that no billing error occurred: mail or deliver you an explanation of the reasons for the card issuer's belief that there was no error.

Billing Error Correction Procedure

A letter or other written notice from you to your credit card issuer is required in order for you to benefit from the "billing error law." In order for the billing-error law to apply, you must notify your card issuer in writing no later than 60 days after the card issuer mails the first periodic statement that includes the disputed charge. charge. To learn where you must address this letter, and about other applicable rules, check the Billing Rights Summary that your card issuer has mailed to you, or ask your credit card issuer to mail you another.

When you contact the card issuer, give the card issuer all of the following information: (1) Your name (as it appears on your credit card); (2) the card number; (3) the name of the seller (as it appears on the credit card receipt, or on the card issuer's monthly statement); (4) the date of your purchase; (5) the amount you paid by credit card; and, (6) a brief description of the billing error. In your letter, you should also include (7) the addresses to which you are mailing the letter, and (8) the date -of mailing or delivery.

If you notify the card issuer of the "billing error," the law that applies to "billing errors" also gives you the right to withhold payment of the disputed amount until (1) the dispute is resolved, or (2) the card issuer, after its investigation, determines that you have no case and explains why. Even then, if you believe you are right, you can continue to withhold payment, but you should be prepared to prove your case if the card issuer takes you to court. However, from that point on, you will incur additional finance charges; and perhaps late payment Charges, and the card issuer will report your account as delinquent. Therefore, unless you are very confident that your position is legally correct, it maybe in your best interest to pay the card issuer and to attempt to resolve the dispute directly with the seller if the card issuer's investigation determined that you do not have a right to withhold payment.

The term "billing error" includes computational and similar errors, as well as unauthorized charges, charges for property or services that haven't been provided, and charges for items that haven't been accepted because they did not comply with the agreement between you and the seller. However, once you have accepted an item, the rules on "billing errors" no longer apply. (You have not "accepted" an item if, upon opening its package or seeing it for the first time, you reject it and notify the seller of the problem.) In that situation, your rights are limited to those provided under the withholding law (described in Legal Guide CR-7, How To Withhold Payment on a Credit Card Purchase).

Credit Card "Withholding Law"

A legal right to withhold payment is provided by two different federal laws - which this Legal Guide refers to as the "billing-error law" and the "withholding law." The "billing-error law" is discussed in this Legal Guide, and the "withholding law" is discussed in Legal Guide CR-7, How to Withhold Payment, on a Credit Card.

The federal "withholding law" gives cardholders a right to assert claims and defenses against the company that issued your credit card. If your card was issued by a bank or some other third party, however, you can withhold payment under the "withholding law" only if the sale (1) was for more than $50, and (2) took place in your home state or within 100 miles of your home address. But your right to assert a "billing error" under the "billing--error law" is not affected by the amount of the sale or the location of the seller. So the right to have the card issue correct a billing error may be more important in many situations.

In some situations, you will only be able to assert rights under one of the two laws. For instance, you may have fully paid the card issuer and nothing remains owing, or you may have used your credit card in another state more than 100 miles from your residence. Therefore, you may have no right to withhold payment under the "withholding law." While you may have no right to withhold payment under the "withholding law," but you may be able to assert a "billing error" under the "billing-error law." All you need to do is to notify the card issuer in writing before the expiration of 60 days after the card issuer mailed the first billing statement that included the disputed charge. In that letter or other written communication, you can describe the problem, and also exercise your right to withhold payment until the billing error is resolved.

There is one situation in which you will not be able to use the "billing-error law." If your claim or defense is based on the purchase or performance of a product that you have already received and accepted, your claim is not considered a "billing error," and your only right, if any, to withhold payment may be limited to the right provided by the "withholding law." For more details about the "withholding law," see Legal Guide CR-7, How To Withhold Payment on a Credit Card Purchase.

How to Play it Safe

To play it safe, follow the procedure recommended under the heading, "Here's How To Correct a Billing Error," on the first page of this Legal Guide. In that way, you will be doing what is needed under both laws. Then, if your card issuer asserts that you have no right to withhold, ask the card issuer to tell you why. Then compare the card issuer's explanation with the information given in this Legal Guide. If you are "in the right," then you might continue to withhold payment. If you are not "in the right," then you should pay your card issuer. If you are uncertain about what to do, consult a lawyer or other legal expert regarding your rights and responsibilities.

What Laws Apply

Both California and federal laws apply. The federal law is the federal Fair Credit Billing Act, 15 U.S.C. sections 1666 and 16661, and Federal Reserve Regulation Z, 12 CFR sections 226.12(c) ("withholding law") and 226.13 ("billing-error law"). The California law is the Song-Beverly Credit Card Act, at Civil Code sections 1747 et seq. Other California laws also affect the operation of the federal law.

Whether you have a "claim" or "defense" against the seller is determined by California law, and whether you have "accepted" an item you have purchased is also determined by California law.

For further information about how these laws apply to the facts of your case, consult a lawyer or other legal expert and share with that person a copy of this flyer.

Prepared by:

Richard A. Elbrecht
Supervising Attorney
Legal Services Unit
November 2000

NOTICE: We attempt to make our Legal Guides accurate as of the date of publication, but they are only guidelines and not definitive statements of the law.. Questions about the law's application to particular cases should be directed to a specialist.

[This document will be available on the Internet. See the Department of Consumer Affairs homepage at www.dca.ca.gov.]

This document may be copied if all of the following conditions are met: the meaning of the copied text is not changed; credit is given to the Department of Consumer Affairs; and all copies are distributed free of charge.

Return to Consumer Information