FAIR CREDIT BILLING ACT [15 U.S.C. 1666-1666j]:
1. BASIC DEFINITIONS UNDER FCBA:
A "billing error" means any of the following:
(1) a reflection on a statement of an extension of credit which was not made to the obligor or, if made, was not in the amount reflected on such statement;
(2) a reflection on a statement of an extension of credit for which the obligor requests additional clarification including documentary evidence thereof;
(3) a reflection on a statement of goods or services not accepted by the obligor or his designee or not delivered to the obligor or his designee in accordance with the agreement made at the time of a transaction;
(4) the creditor's failure to reflect properly on a statement a payment made by the obligor or a credit issued to the obligor;
(5) a computational error or similar error of an accounting nature of the creditor on a statement;
(6) failure to transmit the statement required under section 1637(b) of this Title to the last address of the obligor which has been disclosed to the creditor, unless that address was furnished less than twenty (20) days before the end of the billing cycle for which the statement is required;
(7) any other error described in regulations of the Board.
For the full text of the definition of "billing error" refer to 15 U.S.C. 1666(b).
The term "creditor(s)" under FCBA are those person or entities meeting the definition under 15 U.S.C. 16O2. The term would include all card issuers regardless of whether they meet the definition under the Truth-In-Lending Act. 15 U.S.C. 1602(f); Reg. Z, 12 C.F.R. 226.2(17).
The phrase "open end credit plan" means a plan under which the creditor reasonably contemplates repeated transactions. 15 U.S.C. 1602(i); Jacobs v. Marine Midland Bank, 475 N.Y.S.2d 1003 (1984).
2. OVERVIEW OF FCBA:
The Fair Credit Billing Act, 15 U.S.C. 1666, et seq., sets forth an orderly procedure for identifying and resolving disputes between a cardholder and a card issuer as to the amount due at any time. Gray v. American Express Co., 743 F.2d 10, 240 U.S.App.D.C. 10 (1984).
The Fair Credit Billing Act only applies to transactions under open-end credit plans. Jacobs v. Marine Midland Bank, N.A., 475 N.Y.S.2d 1003, 124 Misc.2d 162 (1984).
The consumer has a right to challenge a creditor's statement of an account in consumer's name. The consumer can obtain resolution and correction of the dispute in a timely and orderly fashion. 15 U.S.C. 1666a.
The FCBA provides protection to the consumer from the "shrinking billing period" which is the time within which to avoid the imposition of finance charges by payment of the balance or portion of the debt. 15 U.S.C. 1666b.
The consumer has a right to make the creditor promptly post payments and credits to his account. 15 U.S.C. 1666c-1666e. If the creditor fails to comply with 15 U.S.C. 1666 and 1666a, the creditor is subject to forfeiture of their right to collect the disputed amount. 15 U.S.C. 1666(e). The consumer has the right to assert all claims and defenses against the credit card issuer which the cardholder has against the merchant honoring the card. 12 C.F.R. 226.12; 15 U.S.C. 1666i; 15 U.S.C. 1666j. The FCBA applies to credit cards. 12 C.F.R. 226.13.
The consumer has an action for actual damages sustained from the creditor who violates FCBA and the creditor must pay a civil penalty of twice the finance charge (minimum of $100.00, maximum of $1,000.00), plus court costs and a reasonable attorney's fees. 15 U.S.C. 1640(a). Class actions may be instituted under 15 U.S.C. 1640.
Ordinarily, a consumer must notify creditor of alleged billing error before bring action under FCBA. Payne v. Diner's Club International, 696 F.Supp. 1153 (U.S.D.C. Ohio). The consumer is not required to send written notice of billing error to creditor where the creditor continues to report the account as delinquent, when in fact it had been satisfied and the creditor had failed to ever send a periodic statement to consumer. 15 U.S.C. 1637(b), 1666(a), 1666(b)(6); Saunders v. Ameritrust of Cincinnati, 587 F.Supp. 896 (U.S.D.C. Ohio 1984).
In cases where the creditor must be notified, the sixty (60) days notice period commences to run from the date the disputed statement is received by the debtor. Debtor must make written dispute within sixty (60) days. Pinner v. Schmidt, 805 F.2d 1258 (5th Cir. 1986).
The conduct of credit issuer, in persistently refusing to adjust or correct cardholder's statement within statutory time limit, continuing to demand payment despite being repeatedly informed that cardholder had canceled her credit card on legitimately disputed charges, declining to even acknowledge that dispute existed, and failing to report dispute to consumer reporting agencies, as required by law, was willful conduct and constituted callous indifference to cardholder's credit rating and financial difficulty likely to be suffered by cardholder. Young v. Bank of America Nat. Trust & Savings Assn., 190 Cal.Rptr. 122, 141 C.A.3d 108 (1983).
Despite the other notices and delays in correction which may be reasonable, if a credit issuer is provided an affidavit of fraud or forgery, then the credit issuer must take immediate action to correct erroneous information previously reported to consumer reporting agencies. Smith v. First Nat. Bank of Atlanta, 837 F.2d 1575 (11th Cir. 1988), cert. denied, 109 S.Ct. 64, 488 U.S. 821, 102 L.Ed.2d 41.
A credit issuer, who fails to acknowledge a consumer's dispute as to a credit card account and who fails to report the dispute to the consumer reporting agency to which it subscribes, has acted wilfully and with callous indifference to the consumer's credit rating and financial difficulties the consumer may suffer. Young v. Bank of America Nat. Trust & Sav. Assn., 190 Cal.Rptr. 122, 141 C.A.3d 108 (Cal. App. 1983).
3. LIMITATIONS OF PROTECTION OF FCBA:
The consumer must provide the creditor with written notice within sixty (60) days of the date the consumer receives the erroneous (disputed) billing. 15 U.S.C. 1666(a). The notification must contain certain items of information (completely identify yourself and the account, bill and/or charges in question) and a clear dispute (explain to the best of your ability why you think the bill is in error). 15 U.S.C. 1666(a)(1)-(3); Himelfarb v. American Express Co., 484 A.2d 1013 (Md. 1984); Saunders v. Ameritrust of Cincinnati, 587 F.Supp. 896 (U.S.D.C. Ohio 1984).
Tort claims may not be asserted under FCBA. 15 U.S.C. 1666i(a). The consumer (obligor) must make a "good faith attempt" to satisfactorily resolve the disagreement with the person honoring the card. 15 U.S.C. 1666i(a). The amount of the transaction must exceed $50.00. 15 U.S.C. 1666i(a). The transaction must occur in the same state as the cardholder's mailing address, or must occur within 100 miles of the cardholder's mailing address. Cf., Plutchok v. European American Bank, 540 N.Y.S.2d 135 (U.S.D.C. N.Y. 1989).
The amount of the claims or defenses asserted may not exceed "the amount of credit outstanding with respect to such transaction at the time the cardholder first notified the card issuer or person honoring the credit card. 15 U.S.C. 1666(b). Note that payments and credits to the cardholder's account are deemed to have been applied, in the order indicated, to the payment of:
(a) late charges in the order of their entry to the account;
(b) finance charges in order of their entry to the account;
(c) debits to the account (other than those above) in the order in which each debit entry to the account was made. 15 U.S.C. 1666i(b).
The above mentioned limitations have an exception that exists when:
(1) the amount of the transaction must exceed $50.00; and
(2) the transaction must occur in the same state as the cardholder's mailing address, or must occur within 100 miles of the cardholder's mailing address.
In essence, those restrictions do not apply when the person honoring the credit card (retailer):
(a) is the same person as the card issuer;
(b) is controlled by the card issuer;
(c) is under direct or indirect common control with the card issuer;
(d) is a franchised dealer in the card issuer's products or services;
(e) has obtained the order for such transaction through a mail solicitation made by or participated in by the card issuer; or
(f) where the defense or claim can be classified as a "billing error" rather than an assertion of a claim or defense. 15 U.S.C. 1666i(a)(3); Izraelewitz v. Manufacturers Hanover Trust Co., 465 N.Y.S.2d 486 (1980); Gray v. American Express Co., 743 F.2d 10 (D.C. Cir. 1984); Lachman v. Bank of Louisiana, 510 F.Supp. 753 (U.S.D.C. Ohio 1981); Lincoln Nat. Bank, N.A. v. Carlson, 426 N.Y.S.2d 433 (1980).
Cardholder's claim arising from issuing bank's false reports of bankruptcy to credit reporting agencies was not encompassed by federal Consumer Credit Protection Act, 15 U.S.C. 1601, et. seq. The Fair Credit Billing Act prohibits creditors from issuing adverse reports relating to a "billing error" for which creditor has received notice from the cardholder. A bankruptcy report was not a "billing error" and cardholder had not alleged any facts indicating that "billing error" was source of report. Doyle v. Household Credit Services, Inc., 844 F.Supp. 13 (U.S.D.C. Me. 1994).
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