Know your rights when facing credit card fraud

Credit card fraud has been on the rise in recent years, and you may be wondering what to do if you have been an unfortunate victim of this crime.

The Federal Trade Commission reports that there were more than 393,000 cases of credit card fraud reported in 2020, up 45 percent from the about 291,000 cases registered for 2019. And these numbers have been growing steadily in the last few years. The FTC hasn’t released its data for 2021 to date.

Credit card fraud is one of the most common forms of identity theft and it involves the criminal use of someone else’s personal credentials in order to use the credit card to purchase goods and services in an unauthorized manner.

There are systems in place to help victims of credit card fraud sort out the damages, so, let’s take a look at what you should know if you find yourself in a situation where your personal information has been violated, and whether or not you are liable.

The Fair Credit Billing Act

The Fair Credit Billing Act (FCBA) is a 1974 amendment to the Truth in Lending Act that puts in place consumer protections against inaccurate or fraudulent credit card charges and other billing errors. If you receive a billing error, by law you are allowed to dispute the charge by sending a written statement to the credit issuer. The FCBA limits the liability to $50, regardless of the total amount charged by an unauthorized user. Disputed charges must be reported within 60 days of the statement date, and the credit card company has 90 days from the day they receive the notice to act.

Reporting credit card fraud

If you have been a victim of credit card fraud, you do have certain legal rights thanks to the Fair Credit Billing Act. To take recourse to this law, you should notify the issuer immediately. You can send in a dispute statement (including your card information and a statement of the issue, along with any documents that make your case) to your credit card company’s address for billing inquiries, not the address to which you send your card payments.

You should send this dispute letter within 60 days of when you first got the card statement with the fraudulent charges. It would be best to send this by certified mail with a return receipt so you have proof of delivery. You might be authorized to send your dispute letter electronically, but only if your issuer requests that you do so.

The card issuer should acknowledge your letter within 30 days of receipt, and it should also resolve your issue within 90 days of getting it. While the issuer is completing its investigation, they cannot try to collect payment, charge interest or report any late payments on the disputed charges. The same rules do not apply to any authorized charges made during the same billing cycle; those will continue to accrue interest if they are not paid on time.

Always report fraud in a timely manner

Most credit card companies today offer zero-liability fraud protection if you report the charges within 30 days. By law, your liability is limited to $50 for card-present fraud. Meaning, the most you could be liable for is $50, thanks to the Fair Credit Billing Act.

Regardless of liability, you obviously want to report fraud as soon as you notice someone is using your account. If you fail to report the fraud, you’ll be responsible to pay the bill when it is due. Once you make a claim, you’re not responsible for any charges under investigation; you just have to make your minimum payment based on the charges you made that month.

It’s a best practice to regularly review all your credit card statements to make sure you’re able to quickly catch any transactions that you didn’t make. This can also help you protect your credit score.

Alert the credit bureaus

You have the right to place a fraud alert on your credit report. This lets creditors know that if someone applies for credit in your name, they should take steps to verify whether it is indeed you. If you put in an alert with one of the three major credit reporting bureaus (Experian, TransUnion and Equifax), it should notify the others.

The Federal Trade Commission advises that you create an identity theft report with the agency and send it to the credit bureaus, along with proof of your identification and a letter providing input about the fraudulent charges. This way you can block the inaccurate information from getting onto your credit report.

The credit bureau will then tell the lenders involved that you are a fraud victim. The lenders cannot pass on the debt to debt collectors. The credit bureaus will also investigate and make changes to your report if you prevail. You could also put in a credit freeze on your credit report so that fraudsters cannot open an account in your name.

After you report to them, providing a copy of your FTC identity theft report, lenders and debt collectors should not report fraudulent accounts to the credit bureaus. Debt collectors should also stop contacting you about the debt.

Tips to avoid being a fraud victim

Fortunately, most major card networks have a “zero liability” policy that ensures you will not be held responsible for fraudulent charges. And federal law limits your losses for unauthorized credit card use to $50. Various states have their own consumer protection laws that could offer you additional protections, too.

Even though you are not responsible for unauthorized charges, it is best to avoid being a fraud victim in the first place. For one, the losses sustained by the card networks as a result of fraud are likely to be passed on to consumers in some form.

  • Monitor your credit accounts. It’s best to be on your guard against fraud and also check your credit accounts regularly to make sure there is no activity you don’t recognize. Review your credit card statements often so you can ensure the transactions were actually made by the user, in this case, you. And if you notice anything out of the usual, report it to your issuer right away.
  • Enable mobile alerts. When you sign up for mobile alerts from your credit card issuer, anytime a suspicious charge posts to your account, you are promptly notified. You can typically toggle with these alerts via your bank’s mobile app. Mobile alerts also come in handy when you wish to be notified about upcoming due dates, or when a purchase is made above a particular dollar amount.
  • Only share your information when it is secure. Anytime you complete a transaction online or in person, only rely on secure payment methods. Check to see that the website is secure and try to avoid using public Wi-Fi. Additionally, when you are in a public space paying for goods or services, keep your card close by and away from others.

What usually happens in the end?

Once you report fraudulent charges and provide any necessary documentation, the bank has 30 days to respond to your issue and begin an investigation. From there, the bank has to complete the investigation within 90 days.

Fortunately for consumers, most instances of credit card fraud end with the dispute charges being removed or money placed back into your account. But in the meantime, you should have received new cards, with new account numbers, to replace the compromised accounts.

The bottom line

Credit card fraud has been rising for years now as digital technologies provide new avenues for fraudsters, in addition to the old-fashioned ways of getting your information from your physical card. You have various rights to deal with the fallouts, but it’s best to be vigilant to begin with.

Artur Starke
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