What Happens If You Falsely Dispute A Credit Card Charge?

Falsely disputing a credit card charge, accompanied with intent to cause trouble, can result in fines, court fees, time in court, and perhaps even a jail term, as this would be committing a type of fraud.

Filing a false dispute is a breach of trust between the card issuer and cardholder.

The extent of the consequences really depends on the circumstances of the dispute.

Regardless, it is your right under the Fair Credit Bill Act (FCBA) to dispute any payments you have made so long as there is a valid reason.

However, if your purpose is to take advantage of this privilege for personal or financial gain, then you can find yourself in a bit of a pickle.

What happens if you accidentally dispute a charge?

Consumers should be aware that falsely disputing a transaction is considered a violation of the cardholder agreement and can result in account closure.

It is always in the best interest of the cardholder to verify card transactions regularly. Banking apps make tracking transactions incredibly easy and efficient.

Still, if a credit card account has more than one authorized user, there may be times when a transaction is not an obvious yes or no.

But it remains the responsibility of the cardholder to make every effort prior to filing a dispute.

Communication with the bank or credit card issuer is very important if a transaction is mistakenly disputed as false.

Can I dispute a credit card charge that I willingly paid for?

Yes, if you willingly paid with your credit card, you have the right under the Fair Credit Bill Act to dispute the associated charge, if there was a billing error or if the product or service was not as advertised.

However, when you have knowingly made the credit card charges, but the declare them to be unauthorized or fraudulent, you have no legal right to dispute it, under no circumstances.

Here are a few scenarios where the cardholder has willingly paid and falsely disputes the charges:

  • Purchasing goods or services with the intent of filing a dispute so the purchase will be “refunded” by the card issuer or bank.
  • Purchasing for goods or services, but regrets spending the money. Having already used the product or service, the cardholder cannot seek a refund and so files a dispute so the purchase will be “refunded” to the account.
  • Filing a ‘revenge’ dispute over receiving ‘bad service’ upon leaving a hotel or restaurant that refused to offer a refund or discount for food already consumed or services already used. The cardholder misrepresents the situation and files a dispute (‘bad service’ is subjective and cannot be the reason for a dispute if the product is as stated or the terms of service have been fulfilled).
  • Claiming their personal information or card was stolen, and disputes charges they actually made. Some fraudsters will go so far as to file a false police report to “prove” that they are stating the truth. This is illegal and unethical and carries high consequences.  

Can you get into trouble for lying on a credit dispute?

Yes, account closure is the most immediate result of falsely disputing a credit card charge.

When a creditor or card issuer detects that something is amiss, the response will likely be to close the account.

All other banking privileges may also be revoked depending on the severity of the situation and the financial relationships with the creditor.

When a credit card is closed in this way, you will be provided with an adverse action notice and your consumer credit report will state “canceled by credit grantor” as the reason.

This type of closure results in a negative impact to the consumer credit score.

A dropping credit score can have a negative impact on employment offers, housing applications, and future credit opportunities.

Can I go to jail for disputing charges?

Yes, there is a high likelihood that you will be put to jail for disputing a charge, especially if it is considered valid under the Fair Credit Billing Act.

People willingly falsify claims to dispute fair credit card charges usually for the following reasons:

  • To receive a refund and also keep the purchased item
  • To cause financial and emotional stress for the merchant, perhaps due to some sort of conflict

In either case, unfairly disputing the charge would be tantamount to committing fraud, which is a criminal offense punishable by law.

Depending on the severity of the crime, frequency, amount of intentional wrongdoing, the nature of the purchase and the amount charged, the punishment can range from small fines to jail time.

Credit card fraud is a federal offense and carries harsh penalties including time in prison.

There is no justification for defrauding businesses and financial institutions by disputing legitimate credit card purchases.

It is a very serious situation, and is treated as such by the legal system.

What to do about unauthorized credit card charges

It can be immediately obvious when a transaction is invalid. However, sometimes legitimate charges may appear that are not recognized by the cardholder.

For example, sometimes the label that appears on the transaction is very cryptic and does not at all suggest the origin of the purchase, which can undoubtedly be a cause for alarm.

Some examples include:

Most of the examples above may also vary in the way they appear on your statement, and it is typically dependent on the issuer of your card.

However, if you do in fact notice suspicious activity on your credit card statement, you will need to contact your credit card issuer immediately.

If the transactions were not authorized by the cardholder or other authorized users, then a dispute must be filed with the lender.

It’s best to review the transaction details online before filing a formal dispute.

This dispute is a signed affidavit which declares that the transactions are not legitimate and should be reversed.

What are valid reasons for disputing a credit card charge?

If you genuinely believe that an error has occurred in your credit card billing history, then you have the lawful right to dispute it.

The Fair Credit Billing Act was established to protect consumers using open-ended credit from unfair billing practices.

This law established the parameters of when and how a consumer may file a dispute, and it is regulated and enforced by the Federal Trade Commission.

Let’s discuss some valid grounds for a dispute.

Fraudulent credit card charges

This is typically when the account owner’s personal or card information has been stolen and used illegally to make purchases, cash advances, or payments for services.

Someone may have opened a credit card under your name, without your permission, only for you to find out years later when you are unable to secure a loan as a result of the resultant unpaid debt.

In this scenario, you would need to report the identity theft to the police as a first step to recovering your credit. The police report is also required if filing a fraud dispute with your lender.

This involves having the credit card issuer perform a chargeback on all fraudulent credit.

Note that fraudulent disputes have no time limit and can be file at any time.

Also, there is typically zero liability for the cardholder. Some cardholder agreements do still hold the consumer responsible for the first $50.

However, there are very few remaining, and these will typically waive the $50 when a police report is submitted.

It may also be wise to cancel the card to prevent any further unauthorized purchases from being made.

Billing errors

Billing errors include the following:

  • Simple math errors
  • Inaccurate refund amounts
  • Automatic billing for canceled subscriptions
  • Goods or services that were neither accepted nor received by the cardholder.

Billing error disputes must be filed within 60 days or two billing cycles depending on cardholder agreement.

Disagreement with service provider or faulty items

This typically includes:

  • A service that was paid for but was not performed as agreed
  • Purchased item was inaccurately represented or not as described:
    • damaged, or faulty in some other manner.
  • Purchased item was not delivered
  • Purchase was invalid
    • Charges not actually made by the consumer
    • Charges in the wrong amount.
    • Charges do not appear in credit statement

The time limit for this type of dispute is 60 days or within two billing cycles, depending on the cardholder agreement.

This includes disputes with companies going out of business. Every effort must be made within that time frame.

How to file a credit card dispute

Regarding non-fraudulent disputes, the Fair Credit Billing Act clearly states the consumer must make a good faith effort to resolve the issue prior to filing a dispute.

Things to consider prior to filing a dispute include:

  • Verify the charge really is incorrect.
  • Contact the merchant or service provider to discuss the matter to seek a correction, refund or other suitable type of resolution.
  • Do not pay the specific transaction while challenging it with the merchant or service provider. It is also good to inform the bank or credit card issuer that you are attempting to resolve the issue directly before filing a formal dispute.

If these efforts fail to resolve the situation, then it is necessary to contact the bank or card issuer to determine next steps and how to file a dispute.

Leave a Reply