The Truth in Lending Act of 1974 is a federal law in the US. It gives consumers the legal right to dispute credit card charges in the case of a billing error. This is referred to as a chargeback, which essentially means that the bank disputes a charge on your behalf. The credit card company will investigate to determine who is in the right, and the result of this investigation will be presented to you within 90 days.
If the credit card company sides with you, they will remove the charge from your credit card statement and your money will be returned to you.
What Happens if the Merchant Disagrees with the Dispute?
While you can dispute a charge made on your credit card, The Truth in Lending Act doesn’t cover what is required by merchants. Their options on how to respond to credit card disputes are outlined in the agreements they signed when they first began accepting credit cards for payment.
When a chargeback is filed, it doesn’t mean that the merchant agrees or even that you don’t owe money. Merchants aren’t specifically prevented from trying to get the money back from you at a future date.
If they disagree with the dispute, merchants can participate in the process of representment, which means that they will challenge the dispute and gather evidence to prove that the transaction was valid. During representment, the issuer is asked to reevaluate the consumer’s claim and review any documentation provided to authenticate the original charge.
Another way merchants might attempt to recover money is by invoicing you for the charges. If you don’t agree to pay, but the merchant believes they have sufficient evidence and they think it’s worth the additional investment, they might take legal action. This would be highly unlikely, though.
In either case, you might need to provide:
- Proof that the goods or services you received did not live up to the quality promised.
- Documentation of the items being returned.
- Proof that you never received the goods or services.
Steps to Avoid Dispute Problems
Even though chargebacks were first created as a consumer protection against fraud, there are those who have begun to abuse the process. If you are found guilty of committing fraud by filing illegitimate chargebacks, you risk the additional fees and penalties that accompany it. To avoid future issues, make sure that you:
- Only file a chargeback when you have a valid reason to do so.
- Hold on to any receipts, emails, or other evidence to help support your case in the event the merchant attempts to get the money back.
- Make every effort to first contact the merchant and resolve the issue. You should give the merchant a chance to make the situation right. In most cases, if you honestly ask for a refund, the merchant will be willing to comply and meet you halfway.
Chargebacks as a Last Resort
In the end, you risk more by taking matters into your own hands and going directly to the bank. If you file a chargeback without attempting to contact the merchant, you run the risk of committing fraud and paying additional penalties. A chargeback is a powerful consumer tool for if you’ve been wrongly charged, but they should only ever be used as a last resort. Even when a chargeback is filed, there’s no guarantee that the final ruling will side in your favor. The best way to avoid being stuck with the bill is to ensure that you’ve attempted honest communication with the merchant and have exhausted all other efforts in coming to an agreeable resolution first.