What Is a Disputed Charge and How Do You Resolve It?

A disputed charge occurs when a cardholder questions a transaction appearing on their financial statement, believing it to be incorrect, unauthorized, or fraudulent. This process is a consumer protection mechanism within personal finance, particularly for credit and debit card transactions.

Understanding Disputed Charges

A disputed charge represents a formal challenge initiated by a cardholder against a specific transaction. This challenge arises from various scenarios where the recorded charge does not align with the cardholder’s expectations or permissions.

Reasons for disputes include unauthorized charges, such as in cases of fraud or a stolen card. Another common scenario is an incorrect charge, where the amount billed is wrong or duplicated.

A dispute may also arise if merchandise or services were paid for but never delivered or rendered as promised. Consumers also dispute charges when goods or services received are defective or unsatisfactory, meaning they do not meet the agreed-upon description or quality. Furthermore, billing errors, such as an incorrect account number or a calculation mistake, can also lead to a formal dispute.

Consumer Protections for Disputed Charges

Federal laws establish a structured process and specific rights for consumers regarding disputed charges. These legal frameworks differ depending on whether the transaction involves a credit card or a debit card.

For credit card disputes, the Fair Credit Billing Act (FCBA) protects consumers from unfair billing practices. Under the FCBA, consumers have 60 days from the date a statement is sent to dispute billing errors in writing.

Billing errors covered include unauthorized charges, incorrect amounts or dates, and charges for goods or services not received or not as described. The card issuer must acknowledge the dispute within 30 days and complete an investigation within two billing cycles, but no more than 90 days.

During the investigation, the card issuer cannot attempt to collect the disputed amount or report it as delinquent to credit bureaus. For unauthorized credit card use, a cardholder’s liability is limited to $50, provided they report the issue promptly.

For debit card transactions and other electronic fund transfers (EFTs), the Electronic Fund Transfer Act (EFTA) governs error resolution and limits consumer liability. Consumers must report an error within 60 days of the statement date on which the error appears. Financial institutions are required to investigate and communicate results within specific timelines.

Liability limits for unauthorized transfers on debit cards vary based on how quickly the issue is reported. If reported within two business days of learning of the loss or theft of the access device, liability is limited to $50. If reported after two business days but within 60 calendar days of the statement being sent, liability can increase up to $500. Failing to report within 60 days can result in unlimited liability for transfers occurring after that period.

Steps to Dispute a Charge

Initiating a dispute requires gathering comprehensive information and documentation. This includes collecting transaction details such as the date, exact amount, and merchant name, along with copies of receipts, invoices, or order confirmations. Any records of communication with the merchant, like emails or chat logs, and other relevant evidence, such as photographs of defective items, should also be compiled.

The initial step is to attempt to resolve the issue directly with the merchant. Contact the merchant by phone, email, or through their online customer service portal, clearly stating the issue and providing the collected evidence. Documenting this interaction is important, noting the date, time, the name of the person spoken to, and a summary of the discussion.

If direct contact with the merchant fails to resolve the issue, or if the charge is clearly fraudulent, escalate the dispute to your card issuer or bank. This formal dispute can be initiated by calling the customer service number on the back of your card, utilizing the online banking portal’s dispute feature, or sending a written letter. When using an online portal, navigate to the dispute section and upload the previously gathered documents as prompted. If sending a written letter, include all pertinent details and copies of supporting evidence, sending it to the specific address designated for billing inquiries.

The Dispute Resolution Process

After a formal dispute is initiated with the card issuer or bank, an investigation process begins. The issuer will examine the claim, often by contacting the merchant to obtain their perspective and supporting documentation. This investigation can take 45 to 90 days.

During this investigation, the bank may provide a provisional credit to the cardholder’s account. This temporary credit makes the disputed funds available to the cardholder while the investigation is ongoing. This provisional credit can be reversed if the investigation concludes in favor of the merchant.

The merchant has an opportunity to present evidence to counter the dispute, such as proof of delivery, signed receipts, or records of service. Based on the evidence from both parties, the issuer determines the outcome. Possible outcomes include a chargeback, where the issuer finds in favor of the cardholder, and the transaction is permanently reversed, with the merchant’s account debited for the disputed amount.

Conversely, the dispute may be denied if the issuer finds in favor of the merchant, often due to insufficient evidence from the cardholder, the dispute being outside the allowed timeframe, or the charge being deemed legitimate. If denied, any provisional credit previously issued will be reversed.