Disputing Credit Card Chargebacks: Legal Recourse for Fraud

A chargeback is the consumer's last line of defense against fraud and other inappropriate credit card charges.

Under state and federal law, credit card companies are required to offer chargebacks to consumers for disputed charges. Chargebacks are essentially refunds for consumers with valid disputes against charges on their credit cards.

Chargebacks can be initiated for two main reasons: billing errors and claims and defenses.

Chargebacks on Billing Errors

Mistakes can and do happen in the retail sector. A credit card company may mistakenly charge you twice for a product or service, or a business may charge you for something you didn't order.

When billing errors occur, you can file for a chargeback and dispute the charge.

Billing errors, under law, may include:

  • Charges for goods or services delivered late
  • Charges for items that were never received
  • Unauthorized charges
  • Charges for items other than those purchased
  • Math errors
  • Failure to post payments or credits (i.e. returns)

Consumers cannot dispute a charge just because they regret their purchase. Chargebacks are reserved for consumers who are wrongfully charged for items they did not want or authorize, and for cases where the purchase did not conform to the terms of the transactions.

The chargeback process requires the consumer to first taken action by writing the creditor using the address for billing inquiries – not the address used for payments. This letter must describe the nature of the billing error.

Consumers have 60 days from the first billing error to get the letter to the creditor, and the FTC (Federal Trade Commission) recommends sending the letter via certified mail.

Creditors must acknowledge the complaint within 30 days of receiving the letter, unless the problem is resolved before this time. After the letter is received, the dispute must be resolved within two billing cycles.

Chargebacks on Claims and Defenses

A chargeback may also be initiated if a product or service does not meet the consumer's expectations. Classified as "claims and defenses," there are additional rules for this type of chargeback.

For claims and defenses chargebacks, consumers have up to one year from the time of purchase to make a claim. But claims can only be made on goods that are valued at $50 or more and were purchased within a 100-mile radius of the consumer.

Consumers must also first attempt to resolve the dispute with the retailer before requesting a chargeback.

The only exception to this rule is if the seller is also the card issuer.

Know Your Rights
  • During the investigation period, consumers can withhold payment only on the disputed amount. Full payments must still be made on charges unrelated to the disputed amount.
  • Creditors cannot report consumers as delinquent on disputed charges, cannot threaten their credit card rating, or close or restrict an account during the investigation. However, creditors may report that a consumer is challenging his or her bill.
  • Creditors cannot deny consumers credit for exercising their FCBA rights.
  • If the bill was a mistake, the creditor must explain the corrections that will be made to the account in writing. Creditors must also remove all late fees, finance charges and other charges related to the disputed charge.
  • If the creditor finds that the consumer is found responsible for a portion of the bill or the charge was not a mistake, the consumer must be informed in writing.
  • Consumers can dispute the results of the investigation, but must take action within 10 days of receiving the explanation.

The chargeback process can be complex, and many consumers are unsure of where to start or whether they have a valid dispute. There are firms dedicated to helping consumers successfully request a chargeback. These firms may also be able to advise on legal options or refer consumers to a lawyer.

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