By Mark Huffman

November 11, 2009
As the economy has worsened, the number of scams targeting credit and debit cards appears to be on the rise. Consumers should carefully protect their credit card information to prevent becoming a victim.

An unauthorized charge can be when someone has stolen your credit card or its number and expiration date. The law is very clear about consumers' rights in these cases.

By reporting the unauthorized charges to your credit card company's fraud department, the Federal Trade Commission (FTC) says consumers can limit their liability for unauthorized credit card charges to $50, under the Fair Credit Billing Act.

To take advantage of the law's consumer protections, you must:

• Write to the creditor at the address given for "billing inquiries," not the address for sending your payments. Include your name, address, account number and a description of the billing error, including the amount and date of the error.

• Send your letter so that it reaches the creditor within 60 days after the first bill containing the error was mailed to you. If the address on your account was changed by an identity thief and you never received the bill, your dispute letter still must reach the creditor within 60 days of when the creditor would have mailed the bill. This is why it's so important to keep track of your billing statements and immediately follow up when your bills don't arrive on time.

• Send your letter by certified mail, and request a return receipt. This will be your proof of the date the creditor received the letter. Include copies (NOT originals) of sales slips or other documents that support your position. Keep a copy of your dispute letter.

The creditor must acknowledge the consumers' complaint in writing within 30 days after receiving it, unless the problem has been resolved. The creditor must resolve the dispute within two billing cycles (but not more than 90 days) after receiving the letter.

Other unauthorized charges

But many unauthorized charges are made, not by people who physically steal your credit card, but by companies that claim you have made a legitimate purchase. Usually a consumer has never heard of the company making the charge, so rightly feels they could not have authorized the charge.

"I recently noticed a charge to my checking account for 11.99 from "great Fun CT," Jeanette, of East Rutherford, N.J., told "After further investigation I realized these charges were being charges to my checking account on a monthly basis starting Dec. of 08."

Jeanette tracked down the company, Trilegiant, and was told they had proof she had registered for the "membership" and agreed to pay the monthly fee. She was told a copy of the authorization would be mailed to her, but she says it never came.

These types of unauthorized charges stem from "negative option" marketing practices, where the consumer may accept a "free" gift but provide their credit card number for a small shipping and payment fee. Later much larger fees appear on their credit card bill. When they complain, the company claims they agreed to purchase additional "services," with the agreement buried in the fine print.

Clear and conspicuous

How does the law treat these kinds of unauthorized purchases? The FTC says the law requires that any additional sale to the consumer must be stated in a "clear and conspicuous" manner. That leaves plenty of gray area for the company and the consumer to disagree over what is "clear and conspicuous."

To fight these types of unauthorized charges, consumers should ask their credit card company to challenge the charge as fraudulent. According to the Office of the Comptroller of the Currency, actions that a bank can take in reviewing a claim are:

• Looking at the transaction in light of other purchases,

• Reviewing if the goods were delivered to the residence or place of business,

• Comparing signatures, requesting a police report,

• Requesting documentation to assist in validating the claim,

• Requesting a signed written statement from the cardholder or authorized user, and

• Requesting information about the cardholder's knowledge of the person who allegedly used the card or of that person's authority to do so.

The bank will notify you of the results of their investigation.

Avoiding the hassle

Consumers, of course, want to avoid having to go through this hassle in the first place. That requires being very careful in how you use your credit card.

For starters, never agree to accept a "free" gift or "trial" offer, especially if it is offered at the conclusion of a legitimate transaction in which you have used your credit card. Plenty of well known companies that you have done business with have had third party marketing agreement with other marketers, sharing your credit card information without your knowledge or consent.

Be especially careful with your debit card, since it is an entryway to your bank account. Money removed from your account in an unauthorized transaction is almost impossible to recover.

Be very leery of any telemarketer who requests your bank information or your credit card number "for verification." Keep in mind that, since 1996, a seller or telemarketer is required by law to obtain your verifiable authorization to obtain payment from your bank account.

That means whoever takes your bank account information over the phone must have your express permission to debit your account, and must use one of three ways to get it.

The person must tell you that money will be taken from your bank account. If you authorize payment of money from your bank account, they must then get your written authorization, tape record your authorization, or send you a written confirmation before debiting your bank account.