Credit Card Laws: Disputes, Fraud Liability, and Fee Limits

Credit card laws in the United States give you a defined set of rights whenever you apply for a card, use one, or fall behind. Your liability for fraud is capped at $50 by statute and usually $0 in practice, your issuer must investigate billing disputes on a strict timetable, interest rate increases cannot reach back to balances you already owe, and debt collectors face hard limits on how and when they can contact you. Three federal statutes do most of the work: the Truth in Lending Act, the Credit CARD Act of 2009, and the Fair Debt Collection Practices Act.

Disputing a Charge on Your Statement

A “billing error” under federal law covers charges for items you never received, incorrect amounts, unauthorized transactions, and payments the issuer failed to credit properly. To get the legal protections, you have to send a written dispute to your card issuer within 60 days of the date the issuer sent the statement showing the error. Send it to the address the issuer designates for billing inquiries, not the payment address. Include your name and account number, the amount you think is wrong, and why.¹

Once the issuer receives your notice, deadlines start running. It must acknowledge the dispute in writing within 30 days. It then has to complete its investigation and either correct the error or explain why the bill is right within two full billing cycles, and no more than 90 days total.¹

While the investigation runs, you can withhold payment on the disputed amount and any related finance charges. You still have to pay the rest of the bill. If the issuer finds an error, it must correct the account and reverse related finance charges. If it decides the charge was correct, it must send a written explanation, plus documentation if you ask for it. An issuer that misses these deadlines loses the right to collect the first $50 of the disputed amount even if the charge turns out to be legitimate.

Disputes Over Defective Goods or Services

A separate provision lets you raise the quality of what you bought with the card issuer, not just the merchant. If you paid by credit card and the product was defective, never delivered, or not as described, you can assert against the issuer the same claims you could assert against the seller.

Three conditions apply. You need to make a genuine effort to resolve the problem with the merchant first. The purchase must be over $50. And the transaction must have taken place in the state where you live or within 100 miles of your billing address.²

The dollar and geographic limits drop away when the merchant is the card issuer itself, when the issuer controls the merchant, or when you placed the order through a mail or online solicitation the issuer participated in. That last exception covers a lot of online buying through issuer-affiliated portals. The most you can recover this way is the amount still owed on that specific transaction when you first notify the issuer.²

What You Owe if Your Card Is Used Fraudulently

Federal law caps your liability for unauthorized charges at $50. That cap only reaches charges made before you notify the issuer about the loss or theft. Anything after you report the card is entirely on the issuer.³

If you report a lost or stolen card before any fraudulent charges post, you owe nothing. And the $50 figure is just the legal ceiling. Virtually every major card network and issuer runs a voluntary zero-liability policy that waives even that, so most cardholders pay nothing at all for fraud in practice.

The cap applies to “unauthorized use,” meaning a transaction by someone with no permission to use the card and from which you received no benefit. A stolen card number used online by a stranger is the clear case. Lending your card to a friend who overspent is harder to characterize as unauthorized.³

Interest Rate and Fee Protections

Your card issuer cannot raise the annual percentage rate on balances you have already accumulated. If you are carrying $3,000 at 18% and the issuer wants to charge 24%, the higher rate can only apply to new purchases going forward. The existing $3,000 stays at 18%.⁴

There is one major exception. If you fall more than 60 days behind on your minimum payment, the issuer can impose a penalty rate on your entire balance, existing debt included. Even then, the issuer has to end the penalty rate within six months if you make every minimum payment on time during that stretch. Missing payments by just over 60 days can temporarily push your rate much higher, but staying current from that point on gives you a defined route back.⁴

Any rate increase on future purchases, or other significant change to your account terms, requires at least 45 days’ written notice before taking effect. Fee and finance charge increases fall under the same rule.⁵

The Double-Cycle Billing Ban

Some issuers used to calculate interest on your current balance and on balances from the previous billing cycle that you had already paid off. That practice, called double-cycle billing, is now prohibited. Interest can only be calculated on balances in the current billing cycle.⁶

Payment Crediting

Your issuer must credit payments as of the date received. It can set a same-day cutoff, but the cutoff cannot be earlier than 5:00 p.m. on the due date. In-person payments at a branch must be accepted until the branch closes, even after 5:00 p.m.⁷

Due dates have to fall on the same day every month, and the issuer must mail or deliver your statement at least 21 days before the due date. If the statement goes out late, the issuer cannot treat your payment as late.

Late and Over-Limit Fees

Late fees must be reasonable and proportional to the cost the issuer incurs from the late payment. Regulations set safe harbor dollar amounts adjusted annually for inflation, but the fee can never exceed the amount of the minimum payment you missed. If your minimum was $25, the late fee cannot be $35.⁸

Your issuer cannot charge you a fee for going over your credit limit unless you specifically opted in to allow over-limit transactions. Even after opting in, only one over-limit fee per billing cycle is allowed. If you stay over the limit without paying down the balance, fees can only be charged for a maximum of three consecutive billing cycles for the same event. You can revoke your opt-in at any time.⁹

Getting Approved: Applicant Protections

Before opening a new account or raising your credit limit, an issuer must evaluate your ability to make at least the minimum payments based on your income or assets and your existing obligations. The issuer can accept your stated income without independent verification but cannot rely solely on “household income” without collecting information about your personal income.¹⁰

If you are under 21, an issuer cannot open an account for you unless you can show an independent ability to make the required minimum payments, or you have a cosigner at least 21 years old who agrees to be liable for the debt. If your card was opened on your own income, your credit limit cannot be increased before you turn 21 unless you still independently qualify for the higher limit. If a cosigner is involved, no limit increase is allowed unless the cosigner agrees in writing to take on the additional liability.¹¹

The Equal Credit Opportunity Act makes it illegal for any creditor, credit card issuers included, to discriminate against you based on race, color, religion, national origin, sex, marital status, or age. Issuers also cannot penalize you because your income comes from public assistance or because you have exercised your rights under consumer credit laws.¹²

If you are denied or given worse terms, the issuer must send a written notice within 30 days explaining what happened. That notice has to include either the specific reasons for the denial or instructions for requesting them.¹³

Rules for Debt Collectors

When a credit card debt is turned over to a third-party collector, the Fair Debt Collection Practices Act kicks in. It governs collection agencies and attorneys collecting on someone else’s behalf, though generally not the original card issuer collecting its own debt.

Contact limits are strict:

No calls before 8:00 a.m. or after 9:00 p.m. in your local time zone.¹⁴
If you tell a collector your employer does not allow personal calls at work, or if the collector has reason to know this, workplace contact has to stop.
Collectors cannot threaten violence, misrepresent the amount owed, or lie about the legal consequences of nonpayment.

Making the Collector Prove the Debt

Within five days of first contacting you, a collector must send a written notice with the amount owed, the name of the creditor, and a statement of your right to dispute the debt. Send a written dispute within 30 days of receiving that notice and the collector must stop all collection activity until it provides verification. If a collector cannot prove you owe the money, it has no business asking you for it.¹⁵

Cutting Off Contact

You can send a written notice telling a collector to stop contacting you altogether. Once it receives your letter, the collector must cease communication with three narrow exceptions: to confirm it will stop, to notify you that it may pursue a specific legal remedy, or to inform you that it intends to take a particular action such as filing a lawsuit.¹⁶

Stopping communication does not erase the debt. The collector can still sue, and the statute of limitations on credit card debt (typically three to six years depending on where you live) keeps running. What the cease-communication right does is shift the dynamic. Instead of calling repeatedly, the collector has to decide whether the debt is worth pursuing through the courts.

How to Enforce Your Rights

If a card issuer or debt collector violates any of these rules, you can file a complaint with the Consumer Financial Protection Bureau at consumerfinance.gov/complaint. The CFPB forwards the complaint to the company, which generally has 15 days to respond and up to 60 days for complex issues. Complaint data is published publicly.¹⁷

For Fair Debt Collection Practices Act violations, you can also sue the collector directly in state or federal court within one year of the violation. Successful claims can result in actual damages plus up to $1,000 in statutory damages per case, and the collector may be required to pay your attorney’s fees. For billing dispute violations under the Truth in Lending Act, the issuer can be held liable for twice the finance charge (with minimum and maximum caps) plus attorney’s fees. You do not have to wait on a government agency to act.

1
Office of the Law Revision Counsel. 15 U.S. Code 1666 – Correction of Billing Errors
2
Office of the Law Revision Counsel. 15 USC 1666i – Assertion of Claims and Defenses
3
Office of the Law Revision Counsel. 15 U.S. Code 1643 – Liability of Holder of Credit Card
4
Office of the Law Revision Counsel. 15 U.S. Code 1666i-1 – Limits on Interest Rate, Fee, and Finance Charge Increases
5
Federal Trade Commission. Public Law 111-24 – Credit Card Accountability Responsibility and Disclosure Act of 2009
6
Office of the Law Revision Counsel. 15 U.S. Code 1637 – Open End Consumer Credit Plans
7
eCFR. 12 CFR 1026.10 – Payments
8
eCFR. 12 CFR 1026.52 – Limitations on Fees
9
eCFR. 12 CFR 1026.56 – Requirements for Over-the-Limit Transactions
10
Consumer Financial Protection Bureau. 12 CFR 1026.51 – Ability to Pay
11
eCFR. 12 CFR 1026.51 – Ability to Pay
12
Office of the Law Revision Counsel. 15 USC 1691 – Scope of Prohibition
13
Consumer Financial Protection Bureau. 12 CFR 1002.9 – Notifications
14
Consumer Financial Protection Bureau. When and How Often Can a Debt Collector Call Me on the Phone?
15
Office of the Law Revision Counsel. 15 U.S. Code 1692g – Validation of Debts
16
Office of the Law Revision Counsel. 15 USC 1692c – Communication in Connection With Debt Collection
17
Consumer Financial Protection Bureau. Submit a Complaint