Consumers Hold Strong Hand in Charge Cards
“My Visa bill had an $18 charge for a breakfast when the receipt said $8,” says one California card holder, “so I told the bank I wouldn’t pay it till it was corrected, and a few statements later, it was. I figure they should give you that service for your money.”
Indeed they should. It even says so on most card statements, right along with the finance charge explanation. Unfortunately, even cereal boxes get more readers.
If there’s a “billing error”--a charge for undelivered merchandise, for the wrong item or wrong amount--the consumer can write his card issuer within 60 days, and the issuer must conduct a “reasonable investigation” and then correct, adjust or explain the charge. Meanwhile, the consumer doesn’t have to pay the disputed amount and can’t be reported as delinquent to reporting agencies.
Furthermore, if a card holder can’t get satisfaction from a merchant on some dispute--including questions of the quality of goods and services--he can refuse to pay any outstanding part of the charge and can’t be reported as delinquent “until the dispute is settled or judgment is rendered.” A common industry example: unsatisfactory car repairs, for which the repair shop refuses to make any adjustment to car or bill. But the transaction must exceed $50 and involve a merchant in the same state or within 100 miles.
No Such Recourse
Specifics aside, both rules had the same intent when enacted under the 1974 Fair Credit Billing Act--to put the card issuer (who has basically bought an unpaid note by advancing payment to the vendor) in a position of some responsibility, so the consumer needn’t pay the bank before the dispute is resolved. Thus, says Dawn Tindal, administrator of card operations for Visa U.S.A. in San Mateo, “you can pay for something and still have recourse if you don’t get the service, while the person who took money out of the mattress to pay has no such recourse.”
Card issuers even have established procedures to discharge their responsibility quickly. Visa network members, for instance, agree to take each other’s “charge-backs,” which means, says Tindal, that they’ll just “send back (a disputed charge) to the merchant’s bank, which will charge it back to the merchant. Then the credit card system is out of the loop.”
Many are willing to stay in the loop, perhaps because they also represent merchants. American Express, for one, will deduct from the consumer’s bill a disputed amount, pass on the consumer complaint and get a response from the merchant. If it’s not resolved, says a company spokesman in New York, “American Express will step in and negotiate between the merchant and the customer, which frequently results in a compromise in cost.”
“Where there are differences, we’ll try to resolve them,” says Randy Roberts, vice president of Bank of America’s Southern California bank card division. But even though banks will “act on behalf of the consumer,” says Howard Stein, vice president of Citicorp Credit Services in New York, “the merchant isn’t treated arbitrarily. The consumer has to write us a letter containing certain assertions.”
There are limits to this help, only starting with the 60-day limit for citing billing errors. Card issuers also have “no further responsibility” under the law once they’ve investigated and corrected or explained the merchant’s bill.
Disputes Over Quality
For a quality dispute, there has to be some balance still owed on the charge in question to have a charge-back. Furthermore, the card issuer may help only if it can successfully charge back the money. It “gets tricky when the bank can’t get out of it,” says a government lawyer, “if, say, the business is out of business. The bank may pursue the consumer.” (A current legal question is who should suffer when airlines go bankrupt: The grounded consumer doesn’t want to pay the bill and, under these rules, may not have to, but who will pay back the bank’s money?)
What’s more, the correction procedure is only a mechanism, its end not guaranteed. Generally, a charge-back is “the only move that’s made,” says Stein, “but a charge can be recharged, then we can send it back, and the whole procedure starts again.” If merchant and consumer are both adamant, and defended by their banks, somebody will have to sue or swallow it. “A lot of banks absorb losses just to keep their customer happy,” says Richard Huddleston, senior vice president of Indiana National Bank in Indianapolis and chairman of the American Bankers Assn. retail electronic services division. “It could be on either side.”
Some fear that consumers will exploit this philosophy, although to deliberately do so to avoid payment would constitute fraud. “A knowledgeable person can take advantage of the system,” says Tindal, “like if they go to a hotel and have a problem, they can dispute it when they get home, as you can’t if you pay by check.” As it is, few consumers question charges at all. Few even know of the regulations, writes Guy Wirsig, operations director for the Los Angeles Better Business Bureau, but “if everyone who buys with credit cards knew they had this ‘weapon’ in hand, the number of Fair Credit Billing Act claims--both ‘quality of goods and services’ and ‘billing error’ claims--would multiply enormously.”
But knowledge of the law or even of the law’s existence may not be the critical factor. “I think it’s more the moral obligation, the idea that they have a right to good service,” says Roberts. “It’s human nature to think that, if there’s a situation that doesn’t seem right, it’s going to be corrected.”
