What Does It Mean to Dispute a Transaction?

Disputing a transaction involves formally challenging a charge that appears on a financial account. This process allows consumers to question charges they believe are incorrect, unauthorized, or fraudulent. Federal laws provide protections for consumers, establishing a framework for addressing billing errors and unauthorized transactions. Understanding these rights and steps can help safeguard financial well-being.

Understanding Disputed Transactions

Consumers may dispute a transaction for various reasons, ranging from outright fraud to billing inaccuracies. An unauthorized charge, where someone uses an account without permission, is a common reason for initiating a dispute. This could be due to a stolen card or compromised account information. A charge for an incorrect amount, a duplicate charge, or a transaction posted despite a service being canceled can also warrant a dispute.

Other scenarios include situations where goods or services were paid for but never received, or when the received items or services were not as described or were defective. A vague or suspicious transaction description on a statement might prompt a consumer to question its validity. While consumers have the right to dispute these charges, it is advisable to first attempt to resolve the issue directly with the merchant.

Gathering Information for a Dispute

Before contacting a financial institution, gathering all relevant information and documentation about the disputed transaction is important. This preparation helps streamline the dispute process and provides a clear record. Key details to collect include the transaction date, the exact amount of the charge, and the merchant’s name as it appears on the statement.

It is also beneficial to compile any records of communication with the merchant, such as emails, receipts, order confirmations, or cancellation numbers. If an attempt was made to resolve the issue directly with the merchant, notes from those interactions, including dates, names of individuals spoken to, and the outcome of the discussion, should be documented. These documents will be helpful when formally initiating the dispute.

Initiating the Dispute Process

Once all necessary information has been gathered, formally initiate the dispute with the financial institution. This typically involves contacting the bank or credit card issuer through their online portal, a dedicated phone number, or by sending a written letter. For credit card transactions, the Fair Credit Billing Act (FCBA) generally requires disputes to be submitted within 60 days from the date the statement containing the error was issued. Some card networks or issuers may allow a longer timeframe, depending on the reason for the dispute.

For debit card transactions and other electronic fund transfers, the Electronic Fund Transfer Act (EFTA) provides similar protections, requiring disputes to be reported within 60 days of the statement date. Upon receiving a dispute, the financial institution may provide a provisional credit to the account for the disputed amount while the investigation is underway. This temporary credit means the consumer is not required to pay the disputed amount or any associated interest during the investigation.

Resolution and Next Steps

After a dispute is initiated, the financial institution begins an investigation, acting as an intermediary between the consumer and the merchant. For credit card disputes, the issuer has up to 90 days to investigate and resolve the claim. For debit card disputes under the EFTA, the bank has 45 days to complete its investigation, though some cases may extend to 90 days.

During this period, the financial institution may request additional information or documentation from the consumer. The investigation aims to determine the validity of the claim, which can result in a permanent credit to the account if the dispute is found in the consumer’s favor, often referred to as a chargeback. If the dispute is denied, the financial institution must provide a written explanation for the denial. If a dispute is denied and the consumer still believes the charge is invalid, options may include appealing the decision with the financial institution or filing a complaint with consumer protection agencies like the Consumer Financial Protection Bureau (CFPB) or the Federal Trade Commission (FTC).