CHAPTER 4—CREDIT BILLING
Section
161. Correction of billing errors.
162. Regulation of credit reports.
163. Length of the billing period.
164. Prompt crediting of payments.
165. Treatment of credit balances.
166. Prompt notification of returns.
167. Use of cash discounts.
168. Prohibition of tie-in services.
169. Prohibition of offsets.
170. Rights of credit card customers.
171. Relation to State laws.
§ 161. Correction of billing errors
(a) If a creditor, within sixty days after having transmitted to an obligor a statement of the obligor’s account in connection with an extension of consumer credit, receives at the address disclosed under section 127(b)(10) a written notice (other than notice on a payment stub or other payment medium supplied by the creditor if the creditor so stipulates with the disclosure required under section 127(a)(7)) from the obligor in which the obligor–
(1) sets forth or otherwise enables the creditor to identify the name and account number (if any) of the obligor,
(2) indicates the obligor’s belief that the statement contains a billing error and the amount of such billing error, and
(3) sets forth the reasons for the obligor’s belief (to the extent applicable) that the statement contains a billing error,
the creditor shall, unless the obligor has, after giving such written notice and before the expiration of the time limits herein specified, agreed that the statement was correct–
(A) not later than thirty days after the receipt of the notice, send a written acknowledgement thereof to the obligor, unless the action required in subparagraph (B) is taken within such thirty-day period, and
(B) not later than two complete billing cycles of the creditor (in no event later than ninety days) after the receipt of the notice and prior to taking any action to collect the amount, or any part thereof, indicated by the obligor under paragraph (2) either–
(i) make appropriate corrections in the account of the obligor, including the crediting of any finance charges on amounts erroneously billed, and transmit to the obligor a notification of such corrections and the creditor’s explanation of any change in the amount indicated by the obligor under paragraph (2) and, if any such change is made and the obligor so requests, copies of documentary evidence of the obligor’s indebtedness; or
(ii) send a written explanation or clarification to the obligor, after having conducted an investigation, setting forth to the extent applicable the reasons why the creditor believes the account of the obligor was correctly shown in the statement and, upon request of the obligor, provide copies of documentary evidence of the obligor’s indebtedness. In the case of a billing error where the obligor alleges that the creditor’s billing statement reflects goods not delivered to the obligor or his designee in accordance with the agreement made at the time of the transaction, a creditor may not construe such amount to be correctly shown unless he determines that such goods were actually delivered, mailed, or otherwise sent to the obligor and provides the obligor with a statement of such determination.
After complying with the provisions of this subsection with respect to an alleged billing error, a creditor has no further responsibility under this section if the obligor continues to make substantially the same allegation with respect to such error.
(b) For the purpose of this section, a “billing error” consists of 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 computation error or similar error of an accounting nature of the creditor on a statement.
(6) Failure to transmit the statement required under section 127(b) of this Act to the last address of the obligor which has been disclosed to the creditor, unless that address was furnished less than twenty days before the end of the billing cycle for which the statement is required.
(7) Any other error described in regulations of the Board.
(c) For the purposes of this section, “action to collect the amount, or any part thereof, indicated by an obligor under paragraph (2)” does not include the sending of statements of account which may include finance charges on amounts in dispute, to the obligor following written notice from the obligor as specified under subsection (a), if–
(1) the obligor’s account is not restricted or closed because of the failure of the obligor to pay the amount indicated under paragraph (2) of subsection (a), and
(2) the creditor indicates the payment of such amount is not required pending the creditor’s compliance with this section.
Nothing in this section shall be construed to prohibit any action by a creditor to collect any amount which has not been indicated by the obligor to contain a billing error.
(d) Pursuant to regulations of the Board, a creditor operating an open end consumer credit plan may not, prior to the sending of the written explanation or clarification required under paragraph (B)(ii), restrict or close an account with respect to which the obligor has indicated pursuant to subsection (a) that he believes such account to contain a billing error solely because of the obligor’s failure to pay the amount indicated to be in error. Nothing in this subsection shall be deemed to prohibit a creditor from applying against the credit limit on the obligor’s account the amount indicated to be in error.
(e) Any creditor who fails to comply with the requirements of this section or section 162 forfeits any right to collect from the obligor the amount indicated by the obligor under paragraph (2) of subsection (a) of this section, and any finance charges thereon, except that the amount required to be forfeited under this subsection may not exceed $50.
[Codified to 15 U.S.C. 1666]
[Source: Section 161 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1512), effective October 28, 1975; as amended by sections 613 and 620 of title VI of the Act of March 31, 1980 (Pub. L. No. 96–221; 94 Stat. 177 and 184), effective October 1, 1982]
NOTE
Short title. Section 301 of title III of the Act of October 28, 1974 provides that this Chapter 4 may be cited as the “Fair Credit Billing Act.”
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§ 162. Regulation of credit reports
(a) After receiving a notice from an obligor as provided in section 161(a), a creditor or his agent may not directly or indirectly threaten to report to any person adversely on the obligor’s credit rating or credit standing because of the obligor’s failure to pay the amount indicated by the obligor under section 161(a)(2), and such amount may not be reported as delinquent to any third party until the creditor has met the requirements of section 161 and has allowed the obligor the same number of days (not less than ten) thereafter to make payment as is provided under the credit agreement with the obligor for the payment of undisputed amounts.
(b) If a creditor receives a further written notice from an obligor that an amount is still in dispute within the time allowed for payment under subsection (a) of this section, a creditor may not report to any third party that the amount of the obligor is delinquent because the obligor has failed to pay an amount which he has indicated under section 161(a)(2), unless the creditor also reports that the amount is in dispute and, at the same time, notifies the obligor of the name and address of each party to whom the creditor is reporting information concerning the delinquency.
(c) A creditor shall report any subsequent resolution of any delinquencies reported pursuant to subsection (b) to the parties to whom such delinquencies were initially reported.
[Codified to 15 U.S.C. 1666a]
[Source: Section 162 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1513), effective October 28, 1975]
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§ 163. TIMING OF PAYMENTS.
(a) TIME TO MAKE PAYMENTS.–A creditor may not treat a payment on an open end consumer credit plan as late for any purpose, unless the creditor has adopted reasonable procedures designed to ensure that each periodic statement including the information required by section 127(b) is mailed or delivered to the consumer not later than 21 days before the payment due date.
(b) GRACE PERIOD.–If an open end consumer credit plan provides a time period within which an obligor may repay any portion of the credit extended without incurring an additional finance charge, such additional finance charge may not be imposed with respect to such portion of the credit extended for the billing cycle of which such period is a part, unless a statement which includes the amount upon which the finance charge for the period is based was mailed or delivered to the consumer not later than 21 days before the date specified in the statement by which payment must be made in order to avoid imposition of that finance charge.
[Codified to 15 U.S.C. 1666b]
[Source: Section 163 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1514), effective October 28, 1975; as amended by section 106(b)(1) of title I of the Act of May 22, 2009 (Pub. L. No. 111–24; 123 Stat. 1742), effective August 20, 2009]
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§ 164. Prompt and fair crediting of payments
(a) IN GENERAL.–Payments received from an obligor under an open end consumer credit plan by the creditor shall be posted promptly to the obligor’s account as specified in regulations of the Board. Such regulations shall prevent a finance charge from being imposed on any obligor if the creditor has received the obligor’s payment in readily identifiable form by 5:00 p.m. on the date on which such payment is due in the amount, manner, location, and time indicated by the creditor to avoid the imposition thereof.
(b) APPLICATION OF PAYMENTS.–(1) APPLICATION OF PAYMENTS.–Upon receipt of a payment from a cardholder, the card issuer shall apply amounts in excess of the minimum payment amount first to the card balance bearing the highest rate of interest, and then to each successive balance bearing the next highest rate of interest, until the payment is exhausted.
(2) CLARIFICATION RELATING TO CERTAIN DEFERRED INTEREST ARRANGEMENTS.–A creditor shall allocate the entire amount paid by the consumer in excess of the minimum payment amount to a balance on which interest is deferred during the last 2 billing cycles immediately preceding the expiration of the period during which interest in deferred.
(c) CHANGES BY CARD ISSUER.–If a card issuer makes a material change in the mailing address, office, or procedures for handling cardholder payments, and such change causes a material delay in the crediting of a cardholder payment made during the 60-day period following the date on which such change took effect, the card issuer may not impose any late fee or finance charge for a late payment on the credit card account to which such payment was credited.
[Codified to 15 U.S.C. 1666c]
[Source: Section 164 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1514), effective October 28, 1975; as amended by section 104 of title I of the Act of May 22, 2009 (Pub. L. No. 111–24; 123 Stat. 1741), effective May 22, 2009]
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§ 165. Treatment of credit balances
Whenever a credit balance in excess of $1 is created in connection with a consumer credit transaction through (1) transmittal of funds to a creditor in excess of the total balance due on an account, (2) rebates of unearned finance charges or insurance premiums, or (3) amounts otherwise owed to or held for the benefit of an obligor, the creditor shall–
(A) credit the amount of the credit balance to the consumer’s account;
(B) refund any part of the amount of the remaining credit balance, upon request of the consumer; and
(C) make a good faith effort to refund to the consumer by cash, check, or money order any part of the amount of the credit balance remaining in the account for more than six months, except that no further action is required in any case in which the consumer’s current location is not known by the creditor and cannot be traced through the consumer’s last known address or telephone number.
[Codified to 15 U.S.C. 1666d]
[Source: Section 165 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1514), effective October 28, 1975; as amended by section 621 of title VI of the Act of March 31, 1980 (Pub. L. No. 96–221; 94 Stat. 184), effective October 1, 1982]
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§ 166. Prompt notification of returns
With respect to any sales transaction where a credit card has been used to obtain credit, where the seller is a person other than the card issuer, and where the seller accepts or allows a return of the goods or forgiveness of a debit for services which were the subject of such sale, the seller shall promptly transmit to the credit card issuer, a credit statement with respect thereto and the credit card issuer shall credit the account of the obligor for the amount of the transaction.
[Codified to 15 U.S.C. 1666e]
: Section 166 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1514), effective October 28, 1975]
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§ 167. Use of cash discounts
(a) With respect to credit card which may be used for extensions of credit in sales transactions in which the seller is a person other than the card issuer, the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card.
(b) With respect to any sales transaction, any discount from the regular price offered by the seller for the purpose of inducing payment by cash, checks, or other means not involving the use of an open-end credit plan or a credit card shall not constitute a finance charge as determined under section 106, if such discount is offered to all prospective buyers and its availability is disclosed clearly and conspicuously.
[Codified to 15 U.S.C. 1666f]
[Source: Section 167 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1515), effective October 28, 1975, and as amended by section 3(c)(1) of the Act of February 27, 1976 (Pub. L. No. 94-222, 90 Stat. 197), effective February 27, 1976; and section 101 of title I of the Act of July 27, 1981 (Pub. L. No. 97-25; 95 Stat. 144), effective July 27, 1981]
NOTE
Expiration date of § 167(a)(2). Section 3(c)(2) of the Act of February 27, 1976 (Pub. L. No. 94-222; 90 Stat. 197) as amended by section 201 of title II of the Act of July 27, 1981 (Pub. L. No. 97-25; 95 Stat. 144), states that section 167(a)(2) shall cease to be effective February 27, 1984.
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§ 168. Prohibition of tie-in services
Notwithstanding any agreement to the contrary, a card issuer may not require a seller, as a condition to participating in a credit card plan, to open an account with or procure any other service from the card issuer or its subsidiary or agent.
[Codified to 15 U.S.C. 1666g]
[Source: Section 168 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1515), effective October 28, 1975]
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§ 169. Prohibition of offsets
(a) A card issuer may not take any action to offset a cardholder’s indebtedness arising in connection with a consumer credit transaction under the relevant credit card plan against funds of the cardholder held on deposit with the card issuer unless–
(1) such action was previously authorized in writing by the cardholder in accordance with a credit plan whereby the cardholder agrees periodically to pay debts incurred in his open end credit account by permitting the card issuer periodically to deduct all or a portion of such debt from the cardholder’s deposit account, and
(2) such action with respect to any outstanding disputed amount not be taken by the card issuer upon request of the cardholder.
In the case of any credit card account in existence on the effective date of this section, the previous written authorization referred to in clause (1) shall not be required until the date (after such effective date) when such account is renewed, but in no case later than one year after such effective date. Such written authorization shall be deemed to exist if the card issuer has previously notified the cardholder that the use of his credit card account will subject any funds which the card issuer holds in deposit accounts of such cardholder to offset against any amounts due and payable on his credit card account which have not been paid in accordance with the terms of the agreement between the card issuer and the cardholder.
(b) This section does not alter or affect the right under State law of a card issuer to attach or otherwise levy upon funds of a cardholder held on deposit with the card issuer if that remedy is constitutionally available to creditors generally.
[Codified to 15 U.S.C. 1666h]
[Source: Section 169 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1515), effective October 28, 1975]
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§ 170. Rights of credit card customers
(a) Subject to the limitation contained in subsection (b), a card issuer who has issued a credit card to a cardholder pursuant to an open end consumer credit plan shall be subject to all claims (other than tort claims) and defenses arising out of any transaction in which the credit card is used as a method of payment or extension of credit if (1) the obligor has made a good faith attempt to obtain satisfactory resolution of a disagreement or problem relative to the transaction from the person honoring the credit card; (2) the amount of the initial transaction exceeds $50; and (3) the place where the initial transaction occurred was in the same State as the mailing address previously provided by the cardholder or was within 100 miles from such address, except that the limitations set forth in clauses (2) and (3) with respect to an obligor’s right to assert claims and defenses against a card issuer shall not be applicable to any transaction in which the person honoring the credit card (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, or (E) has obtained the order for such transaction through a mail solicitation made by or participated in by the card issuer in which the cardholder is solicited to enter into such transaction by using the credit card issued by the card issuer.
(b) The amount of claims or defenses asserted by the cardholder may not exceed the amount of credit outstanding with respect to such transaction at the time the cardholder first notifies the card issuer or the person honoring the credit card of such claim or defense. For the purpose of determining the amount of credit outstanding in the preceding sentence, payments and credits to the cardholder’s account are deemed to have been applied, in the order indicated, to the payment of: (1) late charges in the order of their entry to the account; (2) finance charges in order of their entry to the account; and (3) debits to the account other than those set forth above, in the order in which each debit entry to the account was made.
[Codified to 15 U.S.C. 1666i]
[Source: Section 170 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1515), effective October 28, 1975]
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§ 171. LIMITS ON INTEREST RATE, FEE AND FINANCE CHARGE INCREASES APPLICABLE TO OUTSTANDING BALANCES.
(a) IN GENERAL.–In the case of any credit card account under an open end consumer credit plan, no creditor may increase any annual percentage rate, fee, or finance charge applicable to any outstanding balance, except as permitted under subsection (b).
(b) EXCEPTIONS.–The prohibition under subsection (a) shall not apply to–
(1) an increase in an annual percentage rate upon the expiration of a specified period of time, provided that–
(A) prior to commencement of that period, the creditor disclosed to the consumer, in a clear and conspicuous manner, the length of the period and the annual percentage rate that would apply after expiration of the period;
(B) the increased annual percentage rate does not exceed the rate disclosed pursuant to subparagraph (A); and
(C) the increased annual percentage rate is not applied to transactions that occurred prior to commencement of the period;
(2) an increase in a variable annual percentage rate in accordance with a credit card agreement that provides for changes in the rate according to operation of an index that is not under the control of the creditor and is available to the general public;
increase due to the completion of a workout or temporary hardship arrangement by the obligor or the failure of the obligor to comply with the terms of a workout or temporary hardship arrangement, provided that–
(A) the annual percentage rate, fee, or finance charge applicable to a category of transactions following any such increase does not exceed the rate, fee, or finance charge that applied to that category of transactions prior to commencement of the arrangement; and
(B) the creditor has provided the obligor, prior to the commencement of such arrangement, with clear and conspicuous disclosure of the terms of a the arrangement (including any increases due to such completion or failure); or
(4) an increase due solely to the fact that a minimum payment by the obligor has not been received by the creditor within 60 days after the due date for such payment, provided that the creditor shall–
clude, together with the notice of such increase required under section 127(i), a clear and conspicuous written statement of the reason for the increase and that the increase will terminate not later than 6 months after the date on which it is imposed, if the creditor receives the required minimum payments on time from the obligor during that period; and
(B) terminate such increase not later than 6 months after the date on which it is imposed, if the creditor receives the required minimum payments on time during that period.
(c) REPAYMENT OF OUTSTANDING BALANCE.–
(1) IN GENERAL.–The creditor shall not change the terms governing the repayment of any outstanding balance, except that the creditor may provide the obligor with one of the methods described in paragraph (2) of repaying any outstanding balance, or a method that is no less beneficial to the obligor than one of those methods.
(2) METHODS.–The methods described in this paragraph are–
(A) an amortization period of not less than 5 years, beginning on the effective date of the increase set forth in the notice required under section 127(i); or
(B) a required minimum periodic payment that includes a percentage of the outstanding balance that is equal to not more than twice the percentage required before the effective date of the increase set forth in the notice required under section 127(i).
(d) OUTSTANDING BALANCE DEFINED.–For purposes of this section, the term “outstanding balance” means the amount owed on a credit card account under an open-end consumer credit plan as of the end of the 14th day after the date on which the creditor provides notice of an increase in the annual percentage rate, fee, or finance charge in accordance with section 127(i).
[Codified to 15 U.S.C. § 1666i–1]
[Source: Section 101(b)(2) of title I of the Act of May 22, 2009 (Pub. L. No. 111–24; 123 Stat. 1736), effective May 22, 2009]
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§ 172. ADDITIONAL LIMITS ON INTEREST RATE INCREASES.
(a) LIMITATION ON INCREASES WITHIN FIRST YEAR.–Except in the case of an increase described in paragraph (1), (2), (3), or (4) of section 171(b), no increase in any annual percentage rate, fee, or finance charge on any credit card account under an open end consumer credit plan shall be effective before the end of the 1-year period beginning on the date on which the account is opened.
(b) PROMOTIONAL RATE MINIMUM TERM.–No increase in any annual percentage rate applicable to a credit card account under an open end consumer credit plan that is a promotional rate (as that term is defined by the Board) shall be effective before the end of the 6-month period beginning on the date on which the promotional rate takes effect, subject to such reasonable exceptions as the Board may establish, by rule.
[Codified to 15 U.S.C. § 1666i–2]
[Source: Section 101(d) of title I of the Act of May 22, 2009 (Pub. L. No. 111–24; 123 Stat. 1738), effective May 22, 2009]
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§ 173. Relation to State laws
(a) This chapter does not annul, alter, or affect, or exempt any person subject to the provisions of this chapter from complying with, the laws of any State with respect to credit billing practices, except to the extent that those laws are inconsistent with any provision of this chapter, and then only to the extent of the inconsistency. The Board is authorized to determine whether such inconsistencies exist. The Board may not determine that any State law is inconsistent with any provision of this chapter if the Board determines that such law gives greater protection to the consumer.
(b) The Board shall by regulation exempt from the requirements of this chapter any class of credit transactions within any State if it determines that under the law of that State that class of transactions is subject to requirements substantially similar to those imposed under this chapter or that such law gives greater protection to the consumer, and that there is adequate provision for enforcement.
(c) Notwithstanding any other provisions of this title, any discount offered under section 167(b) of this title shall not be considered a finance charge or other charge for credit under the usury laws of any State or under the laws of any State relating to disclosure of information in connection with credit transactions, or relating to the types, amounts or rates of charges, or to any element or elements of charges permissible under such laws in connection with the extension or use of credit.
[Codified to 15 U.S.C. 1666j]
[Source: Section 171 of title I of the Act of May 29, 1968 (Pub. L. No. 90-321), as added by section 306 of title III of the Act of October 28, 1974 (Pub. L. No. 93-495; 88 Stat. 1516), effective October 28, 1975; section 3(d) of the Act of February 27, 1976 (Pub. L. No. 94-222; 90 Stat. 198), effective February 27, 1976; section 171 redesignated as 173 by section 101(b)(1) of title I of the Act of May 22, 2009 (Pub. L. No. 111–24; 123 Stat. 1736), effective May 22, 2009]
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