ABA Family Legal Guide

Consumer Credit

Credit Records

Defective Goods and Services

May the law help me if I bought a product on credit that is defective or not provided, or if there is a billing error or if the merchant has breached a contract with me?

Yes, if you use a store credit card to purchase shoddy or damaged goods or poor quality services, the Fair Credit Billing Act may help. If you have not already paid off the balance, it allows you to withhold payment that is still due for the disputed transaction when you first notify the card issuer or merchant of your claim or defense, as long as you have made a real attempt to solve the problem with the merchant. A real attempt could be demonstrated by a letter or by notes from a phone call to the complaint department of the retailer—a note made by you on the date of the call and the name of the person with whom you spoke.

You have this right even if you bought the goods or services with a bank card such as Visa or MasterCard, or a travel or entertainment card. Thus, if you purchase a tour or an air travel ticket using your bank credit card, you may be in a good position to recover the cost from the bank that provided the credit for your purchase if the tour or airline goes bankrupt. However, when you use your bank credit card, the law limits your right to withhold the payment to purchases totaling more than $50 that took place in your home state or within one hundred miles of your home address. Banks will often shift this charge back to the merchant. These restrictions do not apply to store credit cards.

If you refuse to pay because the goods or services were defective, the creditor might sue you for payment. If the court finds the goods or services to be truly defective, you probably won't have to pay. Also, during the dispute period, the card issuer cannot report the amount as delinquent to a credit bureau.