Your Rights as a Credit Card Holder

Understanding your rights helps you protect your wallet and your credit in the face of any credit card misuse, or disagreement with a merchant or credit card issuer. These laws address your rights in all phases of credit card use, beginning with your application for a credit card and extending to your credit card billing and use, including any default on your repayment obligations.

The laws you need to know create practices and procedural requirements to ensure credit card issuers treat you fairly. State laws also establish your rights relating to credit cards, but we focus here on federal consumer protections.

Credit card laws cover six separate areas of your relationship with credit card issuers, credit bureaus, and collection agents. Read on to learn your rights as a consumer.

Credit Card Fees & Rates

The Truth in Lending Act (TILA), originally passed in 1968, with its numerous amendments, forms the cornerstone to federal legislation defining how lenders, including credit card issuers, extend credit to consumers. TILA, implemented through Regulation Z, dictates that card issuers accurately disclose credit card terms at specified times, often in a standardized format. The purpose behind TILA’s requirements is to give you the ability to more easily understand your credit card terms, including the various fees and interest rates charged on your card balance. TILA makes it easier to read card agreements, applications and offers, and to compare credit cards.

  • What Can Go Wrong

    You’ve probably received promotional offers from credit card issuers. Some offers include gotcha language in the fine print that consumers fail to notice. Here are a few ways gotcha language can surprise consumers:

    • Accept a zero-percent balance transfer credit card promotional offer of one year, only to lose the zero percent rate after three months because you used the card to make additional purchases during the promotional period

    • Accept a credit card offer with no annual fee, only to incur a $100 annual fee charged after the first year

  • Your Liability

    You may end up paying extra fees or more interest from higher rates. Unclear presentation of information or convoluted language relating to the applicable interest rates or other fees for your credit card may result in unanticipated fees or an increase in the interest you pay on a balance. Information about additional fees and rate increases is not sufficiently prominent, but rather buried in a billing statement.

    An area of recent concern is the loss of promotional or teaser rates for balance transfer credit cards resulting from making purchases with the card during the promotional period. Consumers end up losing the teaser rate and incurring much higher interest charges.

  • Steps to Take to Solve the Problem

    Your card company must make the terms, rate and costs of a credit card account available in writing before you agree to the card. The information must be in plain language. If you believe your card company failed to clearly disclose or present information about fees or rate increases, you can file a complaint with the CFPB.

Handling Sudden Changes to Card Terms and Fees

The Credit CARD Act of 2009 is the most recent legislation expanding consumer credit card rights. Often referred to as the Credit Cardholders’ Bill of Rights but officially known as the Credit Card Accountability, Responsibility, and Disclosure Act, the CARD Act enhances two consumer protections:

  • Transparency. Create more transparency of credit card fees and rates so that you can more easily understand the costs of your card and compare the terms of different cards

  • Fairness. Prevent card companies from practicing certain unfair practices, such as increasing the rate on balances that are over the credit limit while also imposing an over-limit fee

  • What Can Go Wrong

    • Pay an over-limit fee and also incur interest rate increase for going over credit limit in a single billing cycle (prohibited by CARD Act)

    • Charged interest for two full billing cycles of balances, called double-cycle billing (prohibited by CARD Act)

    • Receive notice of rate increase 21 days before rate becomes effective (CARD Act requires 45 days’ notice)

    • Receive 45 days’ notice of interest rate increase in a billing statement but notice is not prominent

  • Your Liability

    You may unknowingly pay additional fees or interest specifically prohibited by the CARD Act. Although the Consumer Financial Protection Bureau (CFPB) continues to enforce prohibitions on double-cycle billing and excessive over-limit penalties and fees, some issuers continue to get away with these practices or bury terms in their cardholder agreements and catch you off guard when you discover additional charges on your billing statement.

  • Steps to Take to Solve the Problem

    Continue to do your homework and thoroughly review cardholder agreements for additional charges and rate increases. Figure out the precise card activity that will trigger a rate increase or fee. If you believe your card issuer has acted unfairly in disclosing or presenting information, or has charged additional interest or fees prohibited by the CARD Act, you can file a complaint with the CFPB.

Transactions Gone Bad: What to do

What if you purchase a customized set of coffee mugs online and still haven’t received them after five weeks? The purchase appears on your billing statement. You contact the online retailer, which insists it delivered the mugs. The Fair Credit Billing Act of 1975 (FCBA) gives you rights in transactions gone bad. It outlines procedures for you and your card issuer to follow in billing disputes. As long as you follow those step-by-step rules, your credit card company must investigate the billing dispute and help you resolve it.

  • What Can Go Wrong

    • Amount charged by a merchant is incorrect

    • Merchant charges twice for a single purchase of merchandise

    • Merchant charges for merchandise you never received

    • Merchant charges you for merchandise you returned

  • Your Liability

    Your maximum liability for an unauthorized charge is $50, provided you report it within two business days of realizing it.

  • Steps to Take to Solve the Problem

    Closely follow the FCBA’s procedural steps in disputing your billing statement. To dispute a charge, you must send a written letter to your card issuer’s billing inquiry address within 60 days after your card company mailed the billing statement. Your letter must contain the following information about you:

    • Name

    • Address

    • Account number

    • Description of the billing error in your statement

    To best ensure your protections, follow these additional procedures:

    • Mail the letter by certified mail, with return receipt requested

    • Include a copy of the sales receipts and other supporting documentation

    • Retain a copy of your letter disputing the charge

Lost or Stolen Credit Cards: What to do

What happens if you lose your credit card or someone steals it to make purchases? By immediately reporting your lost or stolen credit card, you can save yourself a lot of headache and money. TILA and FCBA outline the procedural steps you should take if you experience a lost and stolen credit card. As long as you follow these requirements, you’ll limit your liability.

  • What Can Go Wrong

    • You lose your credit card

    • Someone steals your credit card or obtains your credit card account information and makes unauthorized purchases

    • Unauthorized charge on billing statement that you didn’t initiate

  • Your Liability

    You don’t have to pay for any unauthorized charges made to your card after you report the lost or stolen card to your card issuer. But if an unauthorized charge is made on your credit card before you report the stolen or lost card to your card issuer, you are liable up to $50. If your card is never lost or stolen but someone gains access to your card account to make an unauthorized charge over the phone or Internet, you are not liable for any amount.

  • Steps to Take to Solve the Problem

    • Report a lost or stolen credit card immediately. The longer you wait, the higher your liability can run.

    • Scrutinize your billing statement. Your credit card may be tucked away in your wallet, but someone has taken your card information to make unauthorized charges. Your first line of defense is timely scrutiny. Closely examine each billing statement, confirming the validity of every transaction. Immediately report unauthorized transactions. Make a phone call to the card issuer’s toll-free number.

    • Create a paper trail. Always confirm that you contacted your card issuer about the unauthorized charge, or stolen or lost card, by sending a letter by certified mail with return receipt requested to your card issuer’s billing errors address.

Handling Collection Agents

Among the protections included in the Fair Debt Collection Practices Act (FDCPA) are consumer protections relating to your failure to make card payments according to the cardholder agreement. The FDCPA protects your rights in the unfortunate event a card issuer directs a collection agency to go after you for a delinquent payment. The FDCPA is designed to prevent abusive, unfair or deceptive collection practices — including harassment, false statements and threats.

  • What Can Go Wrong

    • Receive multiple collection agency phone calls a day, sometimes before 8am and after 9pm

    • Receive calls from collection agency representatives who make false statements and threats

    • Receive calls from collection agency representatives who refuse to identify themselves and the company they represent

    • Receive calls from collection agency representatives at your work, and you agree to pay the amount out of fear of losing your job

  • Your Liability

    A collection agency may file a lawsuit against you to recover the disputed amount. If it successfully obtains a judgment in its favor, it can recover the disputed amount by seizing your assets, such as funds in a bank account, or garnish your wages.

  • Steps to Take to Solve the Problem

    • You can file a complaint with the CFPB if you believe the collection agency or card issuer has violated the FDCPA.

    • Fight a lawsuit. If the agency has already filed a lawsuit against you, you may find that hiring an attorney is necessary. In any case, never ignore the lawsuit. If you do not appear in court, you may forfeit your right to fight the charges. The court may enter a default judgment in the creditor’s favor even if the supporting documentation it has provided is weak. Showing up for court gives you a better chance of having the lawsuit dismissed. You can refer to the National Association of Consumer Advocates to locate a suitable attorney.

    • File a lawsuit against the creditor. Go on the offensive. Hire an attorney to sue the agency you believe has violated the FDCPA. The court may award you court costs, attorney’s fees, damages for physical and emotional distress and other damages relating to the agency’s FDCPA violations.

Credit Applications Rules Card Companies Must Follow

The Equal Credit Opportunity Act (ECOA) prohibits credit card issuers from discriminating against you and basing a credit card denial on your race, color, religion, national origin, sex, marital status or age, or receipt of public assistance funds. Although a credit card company may ask you questions about these personal qualities, it must ultimately base its credit card approval and the terms of your cardholder agreement on other relevant factors, like your income, expenses, debt level and credit.

  • What Can Go Wrong

    • Card issuer asks about your plans to have or raise children and uses the information to deny your card approval

    • Card issuer asks whether you’re widowed or divorced and uses your marital status to deny a credit card

    • Card issuer asks whether you receive alimony or child support without telling you that you do not have to answer if you aren’t relying on those payments to obtain card approval

  • Lender Liability

    A lender in violation of anti-discriminatory consumer credit laws may be required to pay you:

    • Actual damages

    • Punitive damages up to $10,000 (more for class action lawsuits)

    • Attorney’s fees

    • Court costs

  • Steps to Take to Solve the Problem

    • Complain to the card issuer. Simply approach the issuer and present your complaint. The company may realize its error, backtrack on its discriminatory actions and approve your application based on your credit, income and debt levels.

    • Take it to the state. You can take your complaint a step further by contacting your state attorney general’s office to confirm whether the credit card issuer violated state equal credit laws.

    • File a complaint with the CFPB or report the violation to another government agency. The card issuer that denied your card approval must provide the appropriate agency and its contact information. The agency you report to varies depending on the card issuer’s asset size and financial institution classification.

    • Go to court. Hire an attorney to represent you in a lawsuit against the card issuer. If you successfully win a judgment, you can receive damages, attorney’s fees and court costs. The court may also award punitive damages if the discriminatory conduct was willful.

Rules for Lost & Stolen Credit & Debit Cards

Many consumers use debit cards for their convenience. With debit card purchases, funds are immediately withdrawn from your checking or savings account. Debit cards, unlike credit cards, don’t involve extensions of credit but rather upfront payments from your account. Consumer protection laws for debit cards are also different from the ones for credit cards. For debit cards, the Electronic Funds Transfer Act (EFTA) limits your liability for a lost or stolen card. The tables below compare your liability depending on the card type.

Liability of Lost & Stolen Credit Cards and Debit Cards

If you report a lost or stolen card… Debit card maximum loss… Credit card maximum loss…
Before any unauthorized charges are made $0 $0
Within 2 business days after you learn about the loss or theft $50 $50
More than 2 business days after you learn about the loss or theft, but fewer than 60 calendar days after your statement showing the unauthorized charge is mailed to you* $500** $50
60 calendar days after your statement showing the unauthorized charge is mailed to you* Unlimited, including all the money withdrawn from your debit card account, the unused portion of your maximum credit line for overdrafts, and funds from other accounts linked to your debit card account ** $50

Liability of Unauthorized Transactions For Cards That Are Not Lost or Stolen

If your card is not lost and you report an unauthorized transaction… For a debit card, your maximum loss is… For a credit card, your maximum loss is…
Within 60 calendar days after your statement is sent to you $0 $0 (unauthorized charge made over the phone or Internet)
60 calendar days after your statement is sent to you Unlimited, including all the money withdrawn from your debit card account, the unused portion of your maximum credit line for overdrafts, and funds from other accounts linked to your debit card account $0 (unauthorized charge made over the phone or Internet)

*The bank must extend the notification period if you show that extenuating circumstances, such as prolonged illness or travel, kept you from reporting a missing debit card.

**Some states have set the maximum liability to $50.

Source: FTC

Credit Card Lawsuit Steps & Defenses

Failing to keep up with minimum payments means you’ve broken your promise to repay your card issuer. Your card issuer (or a debt collection agency that purchases your debt) may sue you for the overdue amount. Here’s what you can expect to happen.

Steps in a Lawsuit
  1. 1.

    Complaint. Your card issuer starts a lawsuit by filing a complaint:

    • Where. The complaint is filed in the county where you lived when the disputed payment originated.

    • What. The complaint details the amount owed and the reasons why you still owe it.

  2. 2.

    Discovery. To respond to your creditor’s claim you may need to gather information. Retrieving supporting evidence may involve filing discovery requests that force your creditor to share information. The card issuer may also request information from you during discovery.

  3. 3.

    Answer. To respond to the complaint, you file your answer. Your answer addresses each disputed card transaction by either agreeing or disagreeing with each transaction. For transactions you disagree with, you respond with a denial or defense.

  4. 4.

    Court Decision. Court issues a decision based on the complaint and your answer. See possible outcomes.

Common Defenses to a Credit Card Lawsuit
  1. 1.

    Denial. You may flat out deny the truth of your card issuer’s claims. Perhaps the card issuer has failed to prove you owe the disputed amount in its complaint.

  2. 2.

    Affirmative defenses. You may acknowledge the truth of your card issuer’s claims, but argue the court should not rule in the issuer’s favor nor decide that you are liable for the disputed charges. Here are a few affirmative defenses:

    • Debt is too old. Each state sets a time period, a statute of limitations, during which a creditor can pursue payment on a card debt. The period lasts from three to 10 years. Once the period is up, the creditor can no longer collect payment. The clock usually begins to run on the date you failed to make a payment or the date your card issuer sent a letter demanding payment. If the disputed amount is older than the time period set by the state, you can argue that the statute of limitations has run on the debt.

    • Incomplete claim. Creditors are generally required to back up claims with supporting documents. These documents include the cardholder agreement and proof that the company or debt collection agency filing the claim owns the debt. If you believe the company filing the claim doesn’t own the debt, you can argue that the claim is incomplete.

    • Invalid service. Your card issuer must serve you with notice of the complaint. This service usually involves an agent who personally delivers a copy of the claim or leaves it with an eligible person at your residence — not simply mailing the complaint or leaving it at your doorstep. If any requirement involving service of the complaint was improperly followed, you can present this as a defense.

Possible Outcomes
1.Judgment in your favor

The court determines your card issuer’s claims are not true or that it failed to produce evidence to prove its claim. A ruling in your favor means your creditor can no longer pursue you for the disputed amount. You may ask the court to order your card issuer to pay your attorney’s fees.

2.Judgment in the card issuer’s favor

The court may decide you owe the disputed amount. Your card issuer will request permission from the court to collect the amount — perhaps by seizing your property, putting a lien on your house, accessing your bank account funds or garnishing your wages.

3.Dismissal

The court may dismiss the case without ruling in favor of you or the card issuer. Perhaps the card issuer filed the claim in the wrong county, or the card issuer was a no-show at a scheduled hearing. Unless the court dismisses the claim “with prejudice,” a dismissal is not ideal because your card issuer can file another claim for the same disputed amount at a later date.

Credit Card Consumer Rights Questions & Answers

Lita Epstein

Daniel Blinn, managing attorney and founder of Consumer Law Group LLC, is a leading consumer advocate. He has served with the National Association of Consumer Advocates, as its treasurer and a board of director member, and is the current chair of the association’s Connecticut chapter. Attorney Blinn holds a law degree from New York University School of Law, and has specialized in representing consumers against business interests since 1997. In this section, Blinn discusses the usefulness of existing consumer credit card protections.

What are the most common misconceptions consumers have regarding their rights when they have a problem with a credit card account?

Many consumers do not understand they have a right to dispute unauthorized charges or billing errors directly with the credit card company. While it is a good idea to address disputes with the merchant or vendor, consumers should also promptly raise disputes with the credit card company. Telephone calls are fine for the initial communications, but consumers should also put the disputes into writing to protect their rights.

What are some of the most helpful consumer credit card protections?

Federal law limits a consumer’s liability for unauthorized charges to $50. Consumers also have the right to dispute billing errors, and they do not have to pay the disputed charges while the creditor investigates the dispute. A consumer can also raises defenses against the credit card company for things like defective merchandise or fraud under certain circumstances. To raise those types of defenses, the charge must be for more than $50, the transaction must have occurred in the consumer’s state or within 100 miles of his or her residence, and the consumer must first have attempted to resolve the dispute directly with the merchant.

How useful has the CARD Act proven to consumers? Has the Credit CARD Act adequately addressed holes in consumer credit card rights?

It has been extremely helpful, and it has saved them more than $4 billion according to a study by the CFPB. The CARD Act significantly limits the ability of card companies to hike interest rates, and it has also all but eliminated certain “traps” that some companies used, such as setting due dates on weekends, which caused consumers to make late payments and incur late fees and interest hikes. The act also makes it easier to pay down debt by requiring that payments be applied first to balances subject to higher interest rates. It also makes it more difficult for credit card companies to burden consumers under age 21 with debt they could not afford to repay.

There are still many credit card company practices that hurt consumers that were not addressed by the CARD Act. For example, many believe that disclosures of credit terms could be improved. And, most card agreements require consumers to give up their right to go to court and require them to go to private arbitration.

What are some practical steps consumers can take to protect themselves in their use of credit cards?

Consumers should carefully examine account statements every month to confirm that all charges are proper and have been entered in the correct amount. If errors are found, they should contact the merchant immediately and also alert the credit card company. The dispute to the credit card company must be in writing, and it must be received within 60 days of the date of the first statement listing the disputed charge. It is a good idea to send the notice by certified mail. Consumers can also reduce the risk of credit card fraud by using strong passwords and by keeping them secure. They should also be careful about giving their account information to anyone over the phone. Consumers should also be wary if a store or restaurant employee takes their credit card outside of their view.

What options does a consumer have when facing a violation of consumer protection rights?

Consumers should bring complaints to the CFPB. They may also benefit from consulting with a private attorney. The National Association of Consumer Advocates is a good place to find one.

What’s the right way to withhold a credit card payment in a billing dispute? Can you end up hurting yourself (and your credit) if you withhold payments?

Consumers are entitled to withhold payment of disputed charges provided they have notified the card company in writing of the nature of the disputed billing. The credit card company may not charge interest on the disputed balance while it investigates the dispute. Even if the company sides with the merchant, it must notify the credit reporting agencies that the consumer disputes the claimed charge. The creditor can, however, turn the account over to collection, and a court or arbitrator may eventually have to decide whether the charge is valid. Should that occur, I recommend that consumers stop using the card and pay down the undisputed balance as soon as practicable.

When would filing a lawsuit be an appropriate step for a consumer involved in a credit card dispute?

Unfortunately, the inclusion of arbitration clauses prevents most consumers from bringing lawsuits. Consumers should consider legal action, either in court or in arbitration, if a credit card company has failed to acknowledge the dispute in its credit reporting or if a debt collector continues to make harassing calls after being informed that the debt has been disputed.

Are there any consumer rights protections you think are missing from existing law?

Credit card companies should not be permitted to force consumers to arbitration claims. The CFPB is considering a regulation that would limit the use of arbitration to prevent consumers from pursuing class action lawsuits.

Glossary: Terms You Need to Know About Your Rights

Authorized User

An individual with permission from the credit card company to use the credit card account for purchases. Authorized users can include individuals besides the account holder and are not always responsible for paying account balances. An authorized user who is not the primary account holder may have limited management control. For example, the user may report a lost or stolen card but may not close the account or add another authorized user.

Billing Statement

Monthly summary issued by the card company that itemizes every transaction occurring in the previous billing cycle and includes rate disclosures and fees.

Consumer Financial Protection Bureau (CFPB)

Federal agency created in 2010 whose stated mission is to carry out federal consumer financial laws, including eliminating unfair business practices. The CFPB has authority to issue rules and enforce these laws.

Demand Letter

Letter sent from a credit card company or collections agency — usually after a consumer fails to respond to past-due notices or phone calls — that requests an overdue or disputed payment.

Double-Cycle Billing

Practice — which the CARD Act prohibits — in which card issuers use the current balance and average daily balance from a consumer’s most recent billing period to determine the interest due, regardless of whether the consumer has already paid off a portion of the balance.

Statute of Limitations

In the context of credit card lawsuits, the period set by state law during which a credit card debt is still collectible. Once the statute of limitations expires, the creditor can no longer legally pursue payment from a consumer.

Billing Cycle or Statement Period

A period, usually 30 days, used by card companies to issue bills and calculate interest charges. Card companies calculate interest charged to the account based on the remaining balance at the end of each billing cycle.

Collections Agency

Third party company hired by a card issuer (or that purchases a consumer’s delinquent account from a card issuer) that pursues consumers for payment of an overdue credit card debt.

Default Judgment

Court’s decision to rule in a party’s favor because the opposing party failed to respond or answer a complaint or discovery request or other such failure. For example, if a card issuer files a lawsuit over a disputed card payment and the consumer fails to appear in court to answer the complaint, the court may issue a default judgment in the card issuer’s favor and hold the consumer liable for the disputed amount.

Discovery

Court process in which a consumer can request information or evidence held by the credit card company or collections agency pertaining to the disputed credit card amount. The lawsuit plaintiff, the credit card company or collections agency, may also submit information requests during discovery.

Grace Period

Time period between the end of a billing cycle and the due date of a credit card monthly payment. During this period, the card issuer cannot charge interest on the balance due. If you pay the balance in full by the due date, you incur no interest charges on the balance.

Unauthorized Charge

A credit card transaction for which the account holder did not give permission and the cardholder received no benefit. An unauthorized charge may occur as a result of a stolen or lost credit card.

Resources

National Association of Consumer Advocates

Nonprofit organization made up of attorneys and consumer advocates that work to promote consumers’ interests, including credit card consumer protections. Consumers can identify attorneys through NACA to represent them in a credit card claim or defense.

Consumer Financial Protection Bureau’s Complaint Form

Consumers can submit complaints through the CFPB’s website. Complaints include credit card billing disputes, changes to your interest rate, fees and other credit card management issues. The CFPB assists consumers by contacting the card issuer and soliciting a response from the company.

TILA (Regulation Z)

Look-up of rules issued by the CFPB relating to consumer credit protections, including those relating to credit card companies and the disclosure laws they must follow. Regulation Z is the practical implementation of TILA. Various legislation — for example, the FCBA and CARD Act — have amended or added to TILA over the decades. Regulation Z requires credit card companies to disclose the credit terms of a card account in a specified format and in a uniform way, to disclose the “true cost” of the credit extension and allow consumers to compare credit cards or other loan types.

Credit CARD Act of 2009

Text of federal legislation passed in 2009 that instituted additional, significant consumer credit card protections.

Fair Credit Billing Act

Text of federal legislation passed in 1974 that establishes procedures that consumers and credit card companies and collections agencies must strictly follow in settling billing disputes with credit accounts.

Fair Debt Collection Practices Act

Text of federal legislation passed in 1978 that restricts debt collectors in their actions and practices as they attempt to retrieve payment from debtors. For example, with credit card debts, the collector cannot contact a consumer at certain times of the day and may be restricted from contacting a consumer at a work place. The FDCPA doesn’t apply to installment contracts, those loans or credit extensions with fixed repayment schedules.

Equal Credit Opportunity Act

Text of federal legislation passed in 1974 prohibiting creditors, including credit card companies, from denying credit approval based on a consumer’s race, color, religion, national origin, sex, marital status or age. The ECOA also prohibits discrimination based on a consumer’s receipt of public assistance funds or exercise of consumer protection rights. Creditors must provide consumers who are denied credit with the reason for the denial.

Electronic Fund Transfer Act

Text of federal legislation passed in 1978 that instituted consumer protections governing electronic fund transfers, including those relating to debit cards.