Credit Laws

Consumer Handbook to Credit Protection Laws
Board of Governors of the Federal Reserve System
Washington, D.C. 20551
12th Printing, April 1993




Shopping Is the First Step
What Laws Apply?
The Finance Charge and Annual Percentage Rate (APR)
A Comparison
Cost of Open-end Credit
Leasing Costs and Terms
Open-end Leases and Balloon Payments
Costs of Settlement on a House


What Law Applies?
What Creditors Look For
Information the Creditor Can’t Use
Special Rules
Discrimination Against Women
If You’re Turned Down


Building Up a Good Record
What Laws Apply?
Credit Histories for Women
Keeping Up Credit Records


What Laws Apply?
Billing Errors
Defective Goods or Services
Prompt Credit for Payments and Refunds for Credit Balances
Cancelling a Mortgage
Lost or Stolen Credit Cards
Unsolicited Cards


Instant Money
EFT in Operation
What Law Applies?
What Record Will I Have of My Transactions?
How Easily Will I Be Able to Correct Errors?
What About Loss or Theft?
What About Solicitations?
Do I Have to Use EFT?
Special Questions About Preauthorized Plans


Complaining to Federal Enforcement Agencies
Penalties Under the Laws







The Consumer Credit Protection Act of 1968–which launched Truth in
Lending–was a landmark piece of legislation. For the first time,
creditors had to state the cost of borrowing in a common language so
that you–the customer–could figure out exactly what the charges would
be, compare costs, and shop around for the credit deal best for you.

Since 1968, credit protections have multiplied rapidly. The concepts of
“fair” and “equal” credit have been written into laws that outlaw unfair
discrimination in credit transactions; require that consumers be told
the reason when credit is denied; let borrowers find out about their
credit records; and set up a way to settle billing disputes.

Each law was meant to reduce the problems and confusion surrounding
consumer credit which, as it became more widely used in our economy,
also grew more complex. Together, these laws set a standard for how
individuals are to be treated in their financial dealings.

The laws say, for instance:

– that you cannot be turned down for a credit card just because
you’re a single woman;

– that you can limit your risk if a credit card is lost or stolen;

– that you can straighten out errors in your monthly bill without
damage to your credit rating; and

– that you won’t find credit shut off just because you’ve reached the
age of 65.

But, let the buyer be aware! It is important to know your fights and how
to use them. This handbook explains how the consumer credit laws can
help you shop for credit, apply for it, keep up your credit standing,
and–if need be–complain about an unfair deal. It explains what you
should look for when using credit and what creditors look for before
extending it. It also points out the laws’ solutions to discriminatory
practices that have made it difficult for women and minorities to get
credit in the past.


Shopping is the First Step

You get credit by promising to pay in the future for something you
receive in the present.

Credit is a convenience. It lets you charge a meal on your credit card,
pay for an appliance on the installment plan, take out a loan to buy a
house, or pay for schooling or vacations. With credit, you can enjoy
your purchase while you’re paying for it–or you can make a purchase
when you’re lacking ready cash.

But there are strings attached to credit too. It usually costs
something. And of course what is borrowed must be paid back.

If you are thinking of borrowing or opening a credit account, your first
step should be to figure out how much it will cost you and whether you
can afford it. Then you should shop around for the best terms.

What Laws Apply?

Two laws help you compare costs:

TRUTH IN LENDING requires creditors to give you certain basic
information about the cost of buying on credit or taking out a loan.
These “disclosures” can help you shop around for the best deal.

CONSUMER LEASING disclosures can help you compare the cost and terms of
one lease with another and with the cost and terms of buying for cash or
on credit.

The Finance Charge and Annual Percentage Rate (APR)

Credit costs vary. By remembering two terms, you can compare credit
prices from different sources. Under Truth in Lending, the creditor must
tell you–in writing and before you sign any agreement–the finance
charge and the annual percentage rate.

The finance charge is the total dollar amount you pay to use credit. It
includes interest costs, and other costs, such as service charges and
some credit–related insurance premiums.

For example, borrowing $100 for a year might cost you $10 in interest.
If there were also a service charge of $1, the finance charge would be

The annual percentage rate (APR)is the percentage cost (or relative
cost) of credit on a yearly basis. This is your key to comparing costs,
regardless of the amount of credit or how long you have to repay it:

Again, suppose you borrow $100 for one year and pay a finance charge of
$10. If you can keep the entire $100 for the whole year and then pay
back $110 at the end of the year, you are paying an APR of 10 percent.
But, if you repay the $100 and finance charge (a total of $110) in
twelve equal monthly installments, you don’t really get to use $100 for
the whole year. In fact, you get to use less and less of that $100 each
month. In this case, the $10 charge for credit amounts to an APR of 18

All creditors–banks, stores, car dealers, credit card companies,
finance companies-must state the cost of their credit in terms of the
finance charge and the APR. Federal law does not set interest rates or
other credit charges. But it does require their disclosure so that you
can compare credit costs. The law says these two pieces of information
must be shown to you before you sign a credit contract or before you use
a credit card.

A Comparison

Even when you understand the terms a creditor is offering, it’s easy to
underestimate the difference in dollars that different terms can make.
Suppose you’re buying a $7,500 car. You put $1,500 down, and need to
borrow $6,000. Compare the three credit arrangements on the next page.

How do these choices stack up? The answer depends partly on what you

The lowest cost loan is available from Creditor A.

If you were looking for lower monthly payments, you could get then by
paying the loan off over a longer period of time. However, you would
have to pay more in total costs. A loan from Creditor B–also at a 14
percent APR, but for four years–will add about $488 to your finance

If that four-year loan were available only from Creditor C, the APR of
15 percent would add another $145 or so to your finance charges as
compared with Creditor B.

Other terms–such as the size of the down payment–will also make a
difference. Be sure to look at all the terms before you make your

Cost of Open-end Credit

Open-end credit includes bank and department store credit cards,
gasoline company cards, home equity lines, and checkoverdraft accounts
that let you write checks for more than your actual balance with the
bank. Open-end credit can be used again and again, generally until you
reach a certain prearranged borrowing limit. Truth in Lending requires
that open-end creditors tell you the terms of the credit plan so that
you can shop and compare the costs involved.

When you’re shopping for an open-end plan, the APR you’re told
represents only the periodic rate that you will be charged–figured on a
yearly basis. (For instance, a creditor that charges 1% percent interest
each month would quote you an APR of 18 percent.) Annual membership
fees, transaction charges, and points, for example, are listed
separately; they are not included in the APR. Keep this in mind and
compare all the costs involved in the plans, not just the APR.

Creditors must tell you when finance charges begin on your account, so
you know how much time you have to pay your bill before a finance charge
is added. Creditors may give you a 25-day grace period, for example, to
pay your balance in full before making you pay a finance charge.

Creditors also must tell you the method they use to figure the balance
on which you pay a finance charge; the interest rate they charge is
applied to this balance to come up with the finance charge. Creditors
use a number of different methods to arrive at the balance. Study them
carefully; they can significantly affect your finance charge.

Some creditors, for instance, take the amount you owed at the beginning
of the billing cycle, and subtract any payments you made during that
cycle. Purchases are not counted. This is called the adjusted balance

Another is the previous balance method. Creditors simply use the amount
owed at the beginning of the billing cycle to come up with the finance

Under one of the most common methods-the average daily balance
method–creditors add your balances for each day in the billing cycle
and then divide that total by the number of days in the cycle. Payments
made during the cycle are subtracted in arriving at the daily amounts,
and, depending on the plan, new purchases may or may not be included.
Under another method–the two-cycle average daily balance
method–creditors use the average daily balances for two billing cycles
to compute your finance charge. Again, payments will be taken into
account in figuring the balances, but new purchases may or may not be

Be aware that the amount of the finance charge may vary considerably
depending on the method used, even for the same pattern of purchases and

If you receive a credit card offer or an application, the creditor must
give you information about the APR and other important terms of the plan
at that time. Likewise, with a home equity plan, information must be
given to you with an application.

Truth in Lending does not set the rates or tell the creditor how to
calculate finance charges–it only requires that the creditor tell you
the method that it uses. You should ask for an explanation of any terms
you don’t understand.

Leasing Costs and Terms

Leasing gives you temporary use of property in return for periodic
payments. It has become a popular alternative to buying–under certain
circumstances. For instance, you might consider leasing furniture for an
apartment you’ll use only for a year. The Consumer Leasing law requires
leasing companies to give you the facts about the costs and terms of
their contracts, to help you decide whether leasing is a good idea.

The law applies to personal property leased to you for more than four
months for personal, family, or household use. It covers, for example,
long-term rentals of cars, furniture, and appliances, but not daily car
rentals or leases for apartments.

Before you agree to a lease, the leasing company must give you a written
statement of costs, including the amount of any security deposit, the
amount of your monthly payments, and the amount you must pay for
licensing, registration, taxes, and maintenance.

The company must also give you a written statement about terms,
including any insurance you need, any guarantees, information about who
is responsible for servicing the property, any standards for its wear
and tear, and whether or not you have an option to buy the property.

Open-end Leases and Balloon Payments

Your costs will depend on whether you choose an open-end lease or a
closed-end lease. Open-end leases usually mean lower monthly payments
than closed-end leases, but you may owe a large extra payment–often
called a balloon payment–based on the value of the property when you
return it.

Suppose you lease a car under a three-year open-end lease. The leasing
company estimates the car will be worth $4,000 after three years of
normal use. If you bring back the car in a condition that makes it worth
only $3,500, you may owe a balloon payment of $500.

The leasing company must tell you whether you may owe a balloon payment
and how it will be calculated. You should also know that:

– you have the right to an independent appraisal of the property’s
worth at the end of the lease. You must pay the appraiser’s fee,

– a balloon payment is usually limited to no more than three times
the average monthly payment. If your monthly payment is $ 200, your
balloon payment wouldn’t be more than $600–unless, for example,
the property has received more than average wear and tear (for
instance, if you drove a car more than average mileage).

Closed-end leases usually have higher monthly payment than open-end
leases, but there is no balloon payment at the end of the lease.

Costs of Settlement on a House

A house is probably the single largest credit purchase for most
consumers–and one of the most complicated. The Real Estate Settlement
Procedures Act, like Truth in Lending, is a disclosure law. The Act,
administered by the Department of Housing and Urban Development,
requires the lender to give you, in advance, certain information about
the costs you will pay when you close the loan.

This event is called settlement or closing, and the law helps you shop
for lower settlement costs. To find out more about it, write to:

Deputy Assistant Secretary for Housing Attention:
RESPA Enforcement U.S. Department of Housing and Urban Development
451 Seventh Street, S.W. Room 5241
Washington, D.C. 20410

Should you need to phone:
(202) 708-4560

A Federal Reserve pamphlet, entitled “A Consumer’s Guide to Mortgage
Closing Costs,” also contains useful information for consumers.



When you’re ready to apply for credit, you should know what creditors
think is important in deciding whether you’re creditworthy. You should
also know what they cannot legally consider in their decisions.

What Law Applies?

EQUAL CREDIT OPPORTUNITY ACT requires that all credit applicants be
considered on the basis of their actual qualifications for credit and
not be turned away because of certain personal characteristics.

What Creditors Look For

The Three C’s. Creditors look for an ability to repay debt and a
willingness to do so–and sometimes for a little extra security to
protect their loans. They speak of the three C’s of credit-capacity,
character, and collateral.

Capacity. Can you repay the debt? Creditors ask for employment
information: your occupation, how long you’ve worked, and how much you
earn. They also want to know your expenses: how many dependents you
have, whether you pay alimony or child support, and the amount of your
other obligations.

Character. Will you repay the debt? Creditors will look at your credit
history (see chapter on Credit Histories and Records): how much you owe,
how often you borrow, whether you pay bills on time, and whether you
live within your means. They also look for signs of stability: how long
you’ve lived at your present address, whether you own or rent, and
length of your present employment.

Collateral. Is the creditor fully protected if you fail to repay?
Creditors want to know what you may have that could be used to back up
or secure your loan, and what sources you have for repaying debt other
than income, such as savings, investments, or property.

Creditors use different combinations of these facts in reaching their
decisions. Some set unusually high standards and other simply do not
make certain kinds of loans. Creditors also use different kinds of
rating systems. Some rely strictly on their own instinct and experience.
Others use a “credit-scoring” or statistical system to predict whether
you’re a good credit risk. They assign a certain number of points to
each of the various characteristics that have proved to be reliable
signs that a borrower will repay. Then, they rate you on this scale.

And so, different creditors may reach different conclusions based on the
same set of facts. One may find you an acceptable risk, while another
may deny you a loan.

Information the Creditor Can’t Use

The Equal Credit Opportunity Act does not guarantee that you will get
credit. You must still pass the creditor’s tests of creditworthiness.
But the creditor must apply these tests fairly, impartially, and without
discriminating against you on any of the following grounds: age, gender,
marital status, race, color, religion, national origin, because you
receive public income such as veterans benefits, welfare or Social
Security, or because you exercise your rights under Federal credit laws
such as filing a billing error notice with a creditor. This means that a
creditor may not use any of those grounds as a reason to:

– discourage you from applying for a loan;

– refuse you a loan if you quality; or

– lend you money on terms different from those granted another person
with similar income, expenses, credit history, and collateral.

Special Rules

Age. In the past, many older persons have complained about being denied
credit just because they were over a certain age. Or when they retired,
they often found their credit suddenly cut off or reduced. So the law is
very specific about how a person’s age may be used in credit decisions.

A creditor may ask your age, but if you’re old enough to sign a binding
contract (usually 18 or 21 years old depending on state law), a creditor
may not:

– turn you down or offer you less credit just because of your age;

– ignore your retirement income in rating your application;

– close your credit account or require you to reapply for it just
because you reach a certain age or retire; or

– deny you credit or close your account because credit life insurance
or other credit-related insurance is not available to persons your

Creditors may “score” your age in a creditscoring system, but:

– if you are 62 or older you must be given at least as many points
for age as any person under 62.

Because individuals’ financial situations can change at different ages,
the law lets creditors consider certain information related to age–such
as how long until you retire or how long your income will continue. An
older applicant might not qualify for a large loan with a 5 percent down
payment on a risky venture, but might qualify for a smaller loan–with a
bigger down payment–secured by good collateral. Remember that while
declining income may be a handicap if you are older, you can usually
offer a solid credit history to your advantage. The creditor has to look
at all the facts and apply the usual standards of creditworthiness to
your particular situation.

Public Assistance. You may not be denied credit just because you receive
Social Security or public assistance (such as Aid to Families with
Dependent Children). But–as is the case with age–certain information
related to this source of income could clearly affect creditworthiness.
So, a creditor may consider such things as:

– how old your dependents are (because you may lose benefits when
they reach a certain age); or

– whether you will continue to meet the residency requirements for
receiving benefits.

This information helps the creditor determine the likelihood that your
public assistance income will continue.

Housing Loans. The Equal Credit Opportunity Act covers your application
for a mortgage or home improvement loan. It bans discrimination because
of such characteristics as your race, color, gender, or because of the
race or national origin of the people in the neighborhood where you live
or want to buy your home. Nor may creditors use any appraisal of the
value of the property that considers the race of the people in the

In addition, you are entitled to receive a copy of an appraisal report
that you paid for in connection with an application for credit, if a you
make a written request for the report.

Discrimination Against Women

Both men and women are protected from discrimination based on gender or
marital status. But many of the law’s provisions were designed to stop
particular abuses that generally made if difficult for women to get
credit. For example, the idea that single women ignore their debts when
they marry, or that a woman’s income “doesn’t count” because she’ll
leave work to have children, now is unlawful in credit transactions.

The general rule is that you may not be denied credit just because you
are a woman, or just because you are married, single, widowed, divorced,
or separated. Here are some important protections:

Gender and Marital Status. Usually, creditors may not ask your gender on
an application form (one exception is on a loan to buy or build a home).

You do not have to use Miss, Mrs., or Ms. with your name on a credit
application. But, in some cases, a creditor may ask whether you are
married, unmarried, or separated (unmarried includes single, divorced,
and widowed).

Child-bearing Plans. Creditors may not ask about your birth control
practices or whether you plan to have children, and they may not assume
anything about those plans.

Income and Alimony. The creditor must count all of your income, even
income from part-time employment.

Child support and alimony payments are a primary source of income for
many women. You don’t have to disclose these kinds of income, but if you
do creditors must count them.

Telephones. Creditors may not consider whether you have a telephone
listing in your name because this would discriminate against many
married women. (You may be asked if there’s a telephone in your home.)

A creditor may consider whether income is steady and reliable, so be
prepared to show that you can count on uninterrupted
income–particularly if the source is alimony payments or part-time

Your Own Accounts. Many married women used to be turned down when they
asked for credit in their own name. Or, a husband had to cosign an
account–agree to pay if the wife didn’t–even when a woman’s own income
could easily repay the loan. Single women couldn’t get loans because
they were thought to be somehow less reliable than other applicants. You
now have a fight to your own credit, based on your own credit records
and earnings. Your own credit means a separate account or loan in your
own name–not a joint account with your husband or a duplicate card on
his account. Here are the rules:

– Creditors may not refuse to open an account just because of your
gender or marital status.

– You can choose to use your first name and maiden name (Mary Smith);
your first name and husband’s last name (Mary Jones); or a combined
last name (Mary Smith-Jones).

– If you’re creditworthy, a creditor may not ask your husband to
cosign your account, with certain exceptions when property rights
are involved.

– Creditors may not ask for information about your husband or
ex-husband when you apply for your own credit based on your own
income–unless that income is alimony, child support, or separate
maintenance payments from your spouse or former spouse.

This last rule, of course, does not apply if your husband is going to
use your account or be responsible for paying your debts on the account,
or if you live in a community property state. (Community property states
are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas,
Washington and Wisconsin.)

Change in Marital Status. Married women have sometimes faced severe
hardships when cut off from credit after their husbands died. Single
women have had accounts closed when they married, and married women have
had accounts closed after a divorce. The law says that creditors may not
make you reapply for credit just because you marry or become widowed or
divorced. Nor may they close your account or change the terms of your
account on these grounds. There must be some sign that your
creditworthiness has changed. For example, creditors may ask you to
reapply if you relied on your ex-husband’s income to get credit in the
first place.

Setting up your own account protects you by giving you your own history
of how you handle debt, to rely on if your financial situation changes
because you are widowed or divorced. If you’re getting married and plan
to take your husband’s surname, write to your creditors and tell them if
you want to keep a separate account.

If You’re Turned Down

Remember, your gender or race may not be used to discourage you from
applying for a loan. And creditors may not hold up or otherwise delay
your application on those grounds. Under the Equal Credit Opportunity
Act, you must be notified within 30 days after your application has been
completed whether your loan has been approved or not. If credit is
denied, this notice must be in writing and it must explain the specific
reasons why you were denied credit or tell you of your right to ask for
an explanation. You have the same rights if an account you have had is

If you are denied credit, be sure to find out why. Remember, you may
have to ask the creditors for this explanation. It may be that the
creditor thinks you have requested more money than you can repay on your
income. It may be that you have not been employed or lived long enough
in the community. You can discuss terms with the creditor and ways to
improve your creditworthiness. The next chapter explains how to improve
your ability to get credit.

If you think you have been discriminated against, cite the law to the
lender. If the lender still says no without a satisfactory explanation,
you may contact a Federal enforcement agency for assistance or bring
legal action as described in the last chapter of this handbook.


Building Up a Good Record

On your first attempt to get credit, you may face a common frustration:
sometimes it seems you have to already have credit to get credit. Some
creditors will look only at your salary and job and the other financial
information you put on your application. But most also want to know
about your track record in handling credit–how reliably you’ve repaid
past debts. They turn to the records kept by credit bureaus or credit
reporting agencies whose business is to collect and store information
about borrowers that is routinely supplied by many lenders. These
records include the amount of credit you have received and how
faithfully you’ve paid it back.

Here are several ways you can begin to build up a good credit history:

– Open a checking account or a savings account, or both. These do not
begin your credit file, but may be checked as evidence that you
have money and know how to manage it. Cancelled checks can be used
to show you pay utility bills or rent regularly, a sign of

– Apply for a department store credit card. Repaying credit card
bills on time is a plus in credit histories.

– Ask whether you may deposit funds with a financial institution to
serve as collateral for a credit card; some institutions will issue
a credit card with a credit limit usually no greater than the
amount on deposit.

– If you’re new in town, write for a summary of any credit record
kept by a credit bureau in your former town. (Ask the bank or
department store in your old hometown for the name of the agency it
reports to.)

– If you don’t qualify on the basis of your own credit standing,
offer to have someone cosign your application.

– If you’re turned down, find out why and try to clear up any

What Laws Apply?

The following laws can help you start your credit history and keep your
record accurate:

THE EQUAL CREDIT OPPORTUNITY ACT gives women a way to start their own
credit history and identity.

THE FAIR CREDIT REPORTING ACT sets up a procedure for correcting
mistakes on your credit record.

Credit Histories for Women

Under the Equal Credit Opportunity Act, reports to credit bureaus must
be made in the names of both husband and wife if both use an account or
are responsible for repaying the debt. Some women who are divorced or
widowed might not have separate credit histories because in the past
credit accounts were listed in their husband’s name only. But they can
still benefit from this record. Under the Equal Credit Opportunity Act,
creditors must consider the credit history of accounts women have held
jointly with their husbands. Creditors must also look at the record of
any account held only in the husband’s name if a woman can show it also
reflects her own creditworthiness. If the record is unfavorable–if an
ex-husband was a bad credit risk–she can try to show that the record
does not reflect her own reputation. Remember that a wife may also open
her own account to be sure of starting her own credit history.

Here’s an example:

Mary Jones, when married to John Jones, always paid their credit card
bills on time and from their joint checking account. But the card was
issued in John’s name, and the credit bureau kept all records in John’s
name. Now Mary is a widow and wants to take out a new card, but she’s
told she has no credit history. To benefit from the good credit record
already on the books in John’s name, Mary should point out that she
handled all accounts properly when she was married and that bills were
paid by checks from their joint checking account.

Keeping Up Credit Records

Mistakes on your credit record–sometimes mistaken identities–can cloud
your credit future. Your credit rating is important, so be sure credit
bureau records are complete and accurate.

The Fair Credit Reporting Act says that you must be told what’s in your
credit file and have any errors corrected.

Negative Information. If a lender refuses you credit because of
unfavorable information in your credit report, you have a right to the
name and address of the agency that keeps your report. Then, you may
either request information from the credit bureau by mail or in person.
You will not get an exact copy of the file, but you will at least learn
what’s in the report. The law also says that the credit bureau must help
you interpret the data–because it’s raw data that takes experience to
analyze. If you’re questioning a credit refusal made within the past 30
days, the bureau is not allowed to charge a fee for giving you

Any error that you find must be investigated by the credit bureau with
the creditor who supplied the data. The bureau will remove from your
credit file any errors the creditor admits are there. If you disagree
with the findings, you can file a short statement in your record giving
your side of the story. Future reports to creditors must include this
statement or a summary of it.

Old Information. Sometimes credit information is too old to give a good
picture of your financial reputation. There is a limit on how long
certain kinds of information may be kept in your file:

– Bankruptcies must be taken off your credit history after 10 years.

– Suits and judgments, tax liens, arrest records, and most other
kinds of unfavorable information must be dropped after 7 years.

Your credit record may not be given to anyone who does not have a
legitimate business need for it. Stores to which you are applying for
credit or prospective employers may examine your record; curious
neighbors may not.

Billing Mistakes. In the next chapter, you will find the steps to take
if there’s an error on your bill. By following these steps, you can
protect your credit rating.


The best way to keep up your credit standing is to repay all debts on
time. But there may be complications. To protect your credit rating, you
should learn how to correct mistakes and misunderstandings that can
tangle up your credit accounts.

When there’s a snag, first try to deal directly with the creditor. The
credit laws can help you settle your complaints without a hassle.

What Laws Apply?

FAIR CREDIT BILLING ACT sets up procedures requiring creditors to
promptly correct billing mistakes; allowing you to withhold payments on
defective goods; and requiring creditors to promptly credit your

IN LENDING gives you three days to change your mind about certain credit
transactions that use your home as collateral; it also limits your risk
on lost or stolen credit cards.

Billing Errors

Month after month John Jones was billed for a lawn mower he never
ordered and never got. Finally, he tore up his bill and mailed back the
pieces–just to try to explain things to a person instead of a computer.

There’s a more effective, easier way to straighten out these errors. The
Fair Credit Billing Act requires creditors to correct errors promptly
and without damage to your credit rating.

A Case of Error. The law defines a billing error as any charge:

– for something you didn’t buy or for a purchase made by someone not
authorized to use your account;

– that is not properly identified on your bill or is for an amount
different from the actual purchase price or was entered on a date
different from the purchase date; or

– for something that you did not accept on delivery or that was not
delivered according to agreement.

Billing errors also include:

– errors in arithmetic;

– failure to show a payment or other credit to your account;

– failure to mail the bill to your current address, if you told the
creditor about an address change at least 20 days before the end of
the billing period; or

– a questionable item, or an item for which you need more

In Case of Error: If you think your bill is wrong, or want more
information about it, follow these steps:

1. Notify the creditor in writing within 60 days after the first bill
was mailed that showed the error. Be sure to write to the address
the creditor lists for billing inquiries and to tell the creditor:

– your name and account number;

– that you believe the bill contains an error and why you
believe it is wrong; and

– the date and suspected amount of the error or the item you
want explained.

2. Pay all parts of the bill that are not in dispute. But, while
waiting for an answer, you do not have to pay the amount in
question (the “disputed amount”) or any minimum payments or finance
charges that apply to it.

The creditor must acknowledge your letter within 30 days, unless
the problem can be resolved within that time. Within two billing
periods–but in no case longer than 90 days–either your account
must be corrected or you must be told why the creditor believes the
bill is correct.

If the creditor made a mistake, you do not pay any finance charges
on the disputed amount. Your account must be corrected, and you
must be sent an explanation of any amount you still owe.

If no error is found, the creditor must send you an explanation of
the reasons for that finding and promptly send a statement of what
you owe, which may include any finance charges that have
accumulated and any minimum payments you missed while you were
questioning the bill. You then have the time usually given on your
type of account to pay any balance, but not less that 10 days.

3. If you still are not satisfied, you