If you have a dispute with the seller about an item or service you purchased with a credit card, you might be able to withhold payment on the card up to the amount outstanding for that purchase. There are a few exceptions to this rule, as well as conditions you must meet, before you withhold payment.
You can often withhold payment—subject to the limits and conditions below—if you believe you shouldn't have to pay a certain credit card charge because the seller refuses to replace or repair an item, or otherwise refuses to correct a problem. (15 U.S.C. § 1661i and 12 C.F.R. § 1026.12(c).) Some examples of when this might happen include:
There are some conditions you must meet in order to use this credit card dispute process.
Before withholding payment, you must make a good-faith effort to resolve the dispute with the seller. If the merchant won't resolve the problem, you can file a dispute with the credit card company using a procedure called "Claims and Defenses." If you're disputing a billing error, however, you'll use a different procedure (see below).
You must also explain to the credit card company, in writing, why you're withholding payment.
There are limits to using this process for certain types of credit cards. If you used a Visa, MasterCard, or another card not issued by the seller, you can refuse to pay only if:
These distance and amount conditions don’t apply if:
You get one year to use this dispute process to raise a claim or defense to payment. But, you can withhold only the balance on the disputed item or service that is still unpaid when you first notify the seller or card issuer of the problem. If you already paid part of the bill, the amount you paid is applied first to late charges, then finance charges, then your purchases, starting with the oldest. So, if you owe a lot of fees and charges, you might not have paid off much—if any—of the disputed amount.
If you conclude that you are entitled to withhold payment, here’s what to do.
Write a letter. Write a letter to the credit card company explaining why you aren’t going to pay. Describe the steps you took to resolve the problem with the merchant. (Alternatively, you might be able to dispute the charge online.)
Mail to the correct address. Before you mail the letter, look at the back of your bill or online for the correct address to use. It will probably be listed under a heading like “Your Rights If You Are Dissatisfied with Your Credit Card Purchases.” Or call the credit card company to find out where to send it. Credit card companies have special addresses they use for this type of correspondence. If you don’t send it to the correct address, the company can disregard your letter.
Keep a copy. And don’t forget to keep a copy of the letter for your records.
The credit card company may not report the amount in dispute as delinquent until the dispute is settled or the matter is decided by a lawsuit.
Again, there is another process for withholding payment on a credit card if you have a dispute with a merchant—the billing error dispute process. You can use this process if, for example, you were charged for property or services that were never delivered to you or someone who wasn't authorized made a charge to your card. But to use this process, you must act within 60 days. To learn more, see How to Dispute a Billing Error on Your Credit or Debit Card Statement.
This article is a modified excerpt from Solve Your Money Troubles, by Amy Loftsgordon and Cara O'Neill (Nolo).