Unhappy With Goods? Credit Cards Can Help

For me, a credit card is just a way to postpone paying, particularly at Christmas,” says a New Hampshire artist.

She’s hardly alone in this approach, which probably sells short a card’s advantages. Credit cards can be a way of postponing payment until one has the money. They can also postpone payment until one is satisfied with the goods or services provided, by mail or over a counter.

“I ordered a tape deck by mail,” says a San Francisco lawyer, “and it didn’t work. They said to contact the manufacturer. I said I wouldn’t: I was sending it back and would tell my bank to credit my bill.

“I always advise people to pay by card if they’re buying an appliance,” he adds, certainly if they’re buying out of their area and absolutely if they’re buying abroad.”

It’s obvious that someone who pays by cash or check, and gets a wrong item, faulty item or no item at all, may have a struggle ahead, while someone who has paid nothing yet has a certain advantage. There’s even a hint on the back of most monthly card statements, deep in the stuff about “Errors and Questions,” and “Your Rights and Our Responsibilities.” What’s more, says one card executive: “People just know that if they write to their banks and say something’s wrong, the bank will respond.”

Not everyone knows. Most people, says a bank regulator, “probably view it the same as a cash or check transaction, figuring they can only complain to the merchant.” Nor is it something card issuers advertise: Not one of a half dozen called would discuss the issue for attribution, not wanting, said one, “to be quoted on how to stick your bank for a loss.”

Law Protects Consumer

Responsibility was conferred on credit card issuers by the Fair Credit Billing Act in 1974, meant “to protect the consumer against inaccurate and unfair credit billing.” After all, the card issuer--whether a network of banks or an individual company--chooses to stand between vendor and consumer, quite profitably advancing payment to one and collecting from the other, and should therefore assume some responsibility.

If the consumer sees a “billing error”--the wrong amount, a charge for something not ordered, not accepted, or “not delivered . . . in accordance with the agreement made”--he has 60 days to write his card issuer, even if he’s already paid. The issuer must conduct a “reasonable investigation,” resolving or explaining the purported error within 90 days. During that time, the consumer needn’t pay the disputed charges nor any attendant finance charges, and he can’t be reported as delinquent to a credit bureau. If there was an error, it must be corrected; if not, the issuer is off the hook, even if the consumer continues to dispute the charge.

If the consumer has a dispute with some merchant over a billed transaction--most commonly involving the quality of goods or services--he can refuse to pay any amount still outstanding, and his card issuer can’t report him as delinquent until the matter is settled. But the transaction must have exceeded $50 and been made in the same state or within 100 miles, and the consumer must have made a “good faith attempt” to settle the dispute with the merchant.

There are obvious limitations, particularly with quality disputes, i.e., the requirement that charges still be outstanding and the geographic restrictions (although it’s “an open issue,” notes one bank regulator, “whether a mail-order transaction took place at home or at the merchant’s”). With both options, moreover, Fair Credit Billing rules offer only a possibility of settlement: If both merchant and customer stick to their guns, someone has to sue, and a court will decide.

There’s also some confusion. “If you order a TV and get a washing machine, that’s easy,” says a bank lawyer. “If you order a 23-inch TV and get a 19-inch one, that’s easy, too, but if you order a TV advertised as high quality and it doesn’t work well, is that a quality dispute, or did you not get what you ordered?”

Some people advise that such cavils always be called billing errors--purchases “not delivered . . . in accordance with agreement”--given the limitations of the quality dispute provision. Even card issuers find billing errors “a little more clear-cut and easy to deal with,” says the bank lawyer. “A quality dispute gets more subjective: What did the ad say? Would a reasonable man think this guy got what he paid for?”

In practice, most consumers just write that they have a problem, and, says a banker, “the people who receive it evaluate it,” doing whatever seems easiest, whatever the regulations. For some, that means just obtaining and shipping back a charge slip without comment (hardly an “investigation”). For others, it means automatically charging a disputed amount back to the merchant’s bank (a contractual arrangement in credit card networks), which charges it back to the merchant; if there’s a dispute, says a regulator, “banks just want to get out of it and leave it to the merchant to sue the customer.”

Some choose to help solve the dispute, whether or not that’s required by law. Billing error or quality dispute, says a New York banker, “our first goal is to resolve it, usually by talking to the merchant. It isn’t just altruistic: The customer’s happy and thinks we’re a great company.” And the bank suffers no loss.

Sometimes Difficult

It may not be easy. Sometimes neither a charge-back nor negotiation is possible. A merchant (an airline, a rock concert promoter) may have gone out of business, or a vendor, says a consumer attorney, “may write back saying, ‘Tough; they have to pay.’ Then the banks, which advanced the payment, may suddenly say it’s a quality dispute and the company is over 100 miles away, and you’re out of luck. If card issuers can’t charge something back to the merchant, they want it from the consumer.”

At this point, the consumer who simply wrote in about a problem should know a bit about his Fair Credit Billing rights. “You don’t have to tell them the law until they tell you there’s no problem,” says the consumer lawyer, “or that there’s nothing they can do.”

Even then, one should be aware that forcing a big card issuer into a dispute means that one may be fighting a big creditor as well as a small merchant, and may end up in court. “Consumers shouldn’t get the impression that they can assert these claims willy-nilly,” says the bank regulator. “The law does give you some protection, but it assumes you have a valid claim.”