A credit dispute typically occurs when one party, the lender, has loaned another party, the borrower, money which they are able to use. This amount of money is typically referred to as a credit line.
A credit line is most frequently associated with a credit card. The borrower is required to pay back the amount which they have borrowed in addition to some amount of interest which is charged by the lender. In most cases, payments are made on a monthly basis.
A credit dispute may arise if there is any type of disagreement between the lender and the borrower. This may occur for any number of reasons. For example, a dispute may arise if the borrower is unwilling or unable to keep up with their loan payments.
Credit disputes often arise from a body of laws called credit laws. These laws are a special category of state and federal laws which aim to regulate issues which range from financial charges to extending pre-established lines of credit.
If a financial company or institution is in the business of lending or offering credit lines to customers, they most likely have to comply with certain credit laws. For example, the Fair Credit Reporting Act (FCRA) is a federal law which protects consumers from credit reporting agencies.
The FCRA grants consumers the right to request a copy of their credit reports. It also permits them to challenge errors within their credit reports which may potentially prevent them from obtaining financial items related to credit, such as loans or credit cards.
What are Some Common Credit Disputes?
There are several different types of common credit disputes with may arise, including:
- Overspending, also referred to as maxing out a credit card, which results in debt;
- Insufficient funds;
- Credit card fraud;
- Other types of fraud;
- Disputes regarding interest rates on credit loans;
- Disputes involving non-payment of loans;
- Denial of an application due to bad credit, such as:
- a housing application;
- a loan application;
- financing; and
- other types of credit based applications.
In many cases, the terms of a credit loan can be negotiated. This may include interest rates or repayment schedules.
In most cases, credit card companies are willing to adjust their terms to specific requests from a borrower. On the other hand, a major shortcoming or violation made by either party may lead to legal action.
What are Some Remedies for Credit Disputes?
A credit dispute may lead to a lawsuit between a lender and a borrower. Remedies for the lender can include placing a lien on a borrower’s property.
The borrower’s property may then be transferred to the lenders. The borrower’s property may also be sold and the profits paid towards the missed payments.
For a borrower, remedies may include a damages award for any losses caused by a violation by the lender. Remedies for a borrower may also include an injunction which allows the parties to rewrite or edit an existing lending contract.
Who can be Held Liable in a Credit Dispute Situation?
The party that can be held liable in a credit dispute situation depends on the circumstances and the facts of each particular situation. The Federal Credit Billing Act (FCBA) provides guidelines for what the creditor is required to do and the rights of the consumer when there is a dispute on a credit card bill.
Examples of errors governed by the Act include:
- Failure of the creditor to send bills to the individual’s current address;
- A demand for explanation of a certain charge or a written proof of purchase;
- Unauthorized charges; and
- Math errors.
This Act is not automatic and requires the consumer to write their creditor at the address for billing inquiries within 60 days of receiving the first bill that contains the errors. The consumer must describe the error sufficiently so that the creditor will be informed and have a fair chance to resolve the issue.
Pursuant to the FCBA, a consumer’s liability for a fraudulent or unauthorized charge on their credit card is limited to $50. However, many card companies have $0 liability policies.
For a claim that falls under the FCBA dispute process, an individual may not be required to pay the disputed charge while the credit card company investigates the claim and the card issuer cannot attempt to collect payment for it. However, the card holder is still responsible for paying the other charges which are not in dispute.
During the investigation, the card issuer may deduct the amount of the disputed charge from the credit limit. For example, if the charge in dispute is a $1,000 charge and the individual has a credit line of $5,000, they may only have access to $4,000 of their credit during the dispute investigation.
Once the investigation is complete, the credit card company is required to send the results to the consumer in writing. If there was an error, the consumer must be refunded the amount plus any related interest charges. However, if the charge was found to be accurate, the consumer will be responsible for paying the amount plus any related finance charges which accrued during the dispute process.
If a consumer does not agree with the creditor’s findings, they have 10 days from the receipt of the written explanation to write to the creditor and inform them the consumer is not going to pay. If the consumer chooses not to pay, the creditor has the right to begin collection proceedings.
If the consumer does not pay the disputed charge and the card issuer reports their account as delinquent to the credit bureaus, it is required to include a statement which explains that the individual did not believe they were responsible for paying the disputed amount.
How has COVID-19 Affected Credit Dispute Laws?
COVID-19 has had a significant impact on every aspect of life all around the world, including financial and credit issues. During this time, many lenders are offering assistance to borrowers so that they are able to maintain some financial stability.
The Coronavirus Aid, Relief, and Economic Security Act (CARES) requires a lender to report to the credit bureaus that consumers are current on their loans if the consumer has sought relief from their lender due to the pandemic. The Consumer Financial Protection Bureau (The Bureau) encourages lenders to continue to voluntarily provide payment relief to consumers and to report accurate information to the credit bureaus as it relates to this relief.
In addition to flexibility for consumers, the Bureau requests flexibility for lenders and credit bureaus due to the extra time it may take to investigate disputes. The Bureau provides that it does not intend to punish companies who exceed the deadline for investigating a dispute so long as they make a good faith effort during the pandemic to conduct the investigation as quickly as possible.
It is important to note that the CARES Act does not suspend negative credit reporting. It does, however, modify adverse credit reporting as well as provide some protections that may help prevent negative credit marks.
This was accomplished by amending the Fair Credit Reporting Act (FCRA). If an individual receives an accommodation for a loan due to the pandemic and they were current on their account prior to that accommodation, the loan provided is required to continue reporting the account as current, which can protect an individual’s credit.
An accommodation may include, but is not limited to:
- A partial payment;
- A deferred payment or payments;
- Forbearance; and
- Other types of assistance or relief which may be provided.
Do I Need a Lawyer for Help with Credit Disputes?
Yes, it is essential to have the assistance of a credit lawyer with any credit dispute issues you may be facing. In many cases, a credit dispute may involve a number of different legal theories and concepts. In addition, credit laws often differ from state to state.
Your attorney can provide you with legal advice, represent you during negotiations with the credit company, and assist you if a lawsuit becomes necessary. Your attorney will ensure that your rights are protected and you receive the appropriate legal remedy in your situation.