How Does Consumer Credit Law Address Unauthorized Account Charges?

Consumer credit law, particularly under the Fair Credit Billing Act (FCBA), offers strong protections to consumers against unauthorized charges on their credit accounts. If a consumer identifies fraudulent or unauthorized transactions, they are entitled to dispute those charges and seek redress from their credit card issuer or financial institution.

Steps to Take When Unauthorized Charges Occur:

1. Review Your Account and Identify Unauthorized Charges: Regularly monitor your credit card and bank statements for any unfamiliar charges. If you notice unauthorized transactions, take immediate action to report them.
2. Report the Unauthorized Charge: Contact the credit card issuer or bank as soon as you spot any suspicious charges. Under the FCBA, you have 60 days from the date of the statement containing the unauthorized charge to notify the creditor. Failing to notify the issuer in a timely manner may limit your ability to dispute the charge.
3. File a Formal Dispute: Once you’ve identified an unauthorized charge, submit a written dispute to your credit card company. This communication should include:
   • The specific charge(s) in question.
   • A request to investigate and remove the charges.
   • Any supporting documentation (e.g., fraud reports, proof of your absence from the location of the transaction).
4. Avoid Paying the Disputed Charge While It’s Under Investigation: Under consumer protection laws, you are not required to pay the disputed charge during the investigation. Your creditor must conduct an investigation and resolve the dispute within two billing cycles (a maximum of 90 days). The creditor must also ensure that any interest or late fees related to the disputed charge are not added.
5. Gather Evidence of Fraud or Identity Theft: If the charge is a result of identity theft or credit card fraud, report the incident to the Federal Trade Commission (FTC) and your local law enforcement. You may also want to place a fraud alert or credit freeze with the major credit reporting agencies (Equifax, Experian, TransUnion) to prevent further unauthorized activity.

Legal Protections for Consumers:

• Liability for Unauthorized Charges: Under the FCBA, your maximum liability for unauthorized credit card charges is $50. If you report the fraud or unauthorized charge within two business days of discovering it, your liability is $0. After two days, you may be liable for up to $50, and after 60 days, the charge may not be eligible for dispute resolution under FCBA.
• Chargeback Rights: If unauthorized charges were made to your account through a service provider or merchant, you may be able to initiate a chargeback. This process allows the bank or card issuer to reverse the transaction and credit your account back.
• Fraud Investigations: Credit card companies are required to investigate unauthorized transactions and, if the investigation supports your claim, remove the charges. During the investigation, the credit card issuer must treat the disputed amount as if it’s not owed.

Example:

A consumer notices an unfamiliar charge on their credit card bill from an online retailer they’ve never visited. After reviewing the charge, they immediately contact the credit card issuer and file a written dispute. The card issuer investigates the charge and confirms that the transaction was fraudulent. The consumer is not required to pay for the charge, and the amount is removed from their account. Additionally, the card issuer works with law enforcement to trace the fraud.