What Does a Disputed Transaction Mean?

A disputed transaction refers to a charge appearing on a financial statement that a cardholder challenges as unauthorized or incorrect. Knowing the process for resolution helps consumers protect their funds and financial standing.

Understanding Disputed Transactions

A disputed transaction broadly encompasses any charge on a bank or credit card statement that a consumer believes is erroneous. Common reasons for initiating a dispute include unauthorized charges, such as those resulting from fraud or a stolen card. Consumers may also dispute transactions where the amount charged differs from the agreed-upon price, or when duplicate charges for the same purchase appear.

Further grounds for disputing a charge involve situations where goods or services were not received as described, or not received at all. This also extends to instances where a subscription or service was canceled, but charges continue to appear on the statement. These types of challenges apply across various payment methods, including credit cards, debit cards, and certain electronic bank transfers.

Steps to Initiate a Dispute

Initiating a transaction dispute requires prompt action, generally within specific timeframes, to preserve your rights. Before contacting the financial institution, gather all relevant information, including the exact transaction date and amount, the merchant’s name, and a clear, concise reason for the dispute.

Supporting documentation, such as receipts, order confirmations, cancellation emails, or any communication exchanged with the merchant, is important. Consumers typically initiate a dispute by contacting their bank or card issuer’s customer service, often through a dedicated phone line or an online banking portal. Some institutions may also accept dispute submissions via mail.

During initial contact, provide all gathered information thoroughly and precisely to ensure the financial institution has a complete understanding of the issue. Maintain detailed records of all communications, including dates, times, names of representatives, and any reference numbers provided. Keep copies of all submitted documentation.

The Dispute Investigation and Resolution

Once a consumer initiates a dispute, the financial institution begins a formal investigation process. The bank typically acknowledges receipt of the dispute within a few business days, and for credit card disputes, the card issuer has 30 days to acknowledge the complaint. In many cases, especially for debit card disputes, a provisional credit may be issued to the consumer’s account while the investigation is ongoing, although this credit can be reversed if the dispute is ultimately denied.

The financial institution communicates with the merchant involved, often through a process known as a chargeback, to gather their side of the transaction details. For credit card disputes under the Fair Credit Billing Act (FCBA), the issuer must complete its investigation within two billing cycles, but no more than 90 days, from receiving the dispute. For debit card disputes governed by Regulation E, financial institutions generally have 10 business days to investigate, though this period can extend to 45 or even 90 days, provided provisional credit is given.

Throughout this period, the bank may request additional information from either the consumer or the merchant to aid its decision-making. The investigation concludes with the financial institution determining the validity of the dispute, which can result in the dispute being resolved in the consumer’s favor, a partial resolution, or the dispute being denied. If the dispute is denied, any provisional credit issued may be reversed, and the consumer will be notified of the decision and reasons for it.

Your Rights as a Consumer

Consumers are afforded specific protections when disputing transactions, primarily under federal laws like the Fair Credit Billing Act (FCBA) and the Electronic Fund Transfer Act (EFTA), which is implemented through Regulation E. The FCBA applies to open-end credit accounts, such as credit cards, and protects consumers from unfair billing practices. This law limits a cardholder’s liability for unauthorized credit card charges to $50, though many card issuers voluntarily offer zero-liability policies.

The EFTA, along with Regulation E, provides similar protections for electronic fund transfers, including debit card transactions and ATM withdrawals. Under Regulation E, consumer liability for unauthorized debit card transactions depends on the reporting timeframe; reporting within two business days of learning of a loss or theft limits liability to $50. Waiting longer can increase potential liability, up to $500 if reported within 60 days, and potentially the entire amount if reported after 60 days. These laws establish specific timeframes for reporting errors and mandate that financial institutions conduct prompt investigations.