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Consumer Protection

TL;DR
  • Reg E governs debit/ACH/EFT with tiered liability and error resolution
  • Reg Z governs credit cards with billing disputes, $50 max liability, merchandise protection
  • FCBA (part of Reg Z) establishes formal billing error procedures
  • Understanding these helps anticipate dispute processing and issuer behavior

Overview​

Federal regulations protect consumers in payment transactions. While merchants don't directly administer these regulations (that's the issuer's role), understanding them helps explain:

  • Why dispute rights exist and how they differ by payment method
  • Why issuers have specific response timelines
  • What documentation helps or hurts in disputes
  • Why credit card disputes differ fundamentally from debit card disputes

Key Regulations​

Regulation E (Electronic Fund Transfer Act)​

Covers: Debit cards, ATM transactions, ACH transfers, P2P payments (when bank-funded), payroll cards

Key provisions:

  • Liability tiers: $0 → $50 → $500 → unlimited based on reporting speed
  • Resolution timeline: 10-45 days (90 days for certain transactions)
  • Provisional credit: Required if investigation extends beyond 10 days
  • Scope: Covers unauthorized transactions, NOT merchandise disputes

Full Regulation E Guide →

Regulation Z (Truth in Lending Act)​

Covers: Credit cards, charge cards, HELOCs, BNPL (per 2024 CFPB rule)

Key provisions:

  • Maximum liability: $50 statutory (most issuers offer $0)
  • Written notice: Required within 60 days of statement
  • Resolution timeline: 30-day acknowledgment + 2 billing cycles (max 90 days)
  • Scope: Covers billing errors AND merchandise disputes
  • Collection pause: Cannot collect on disputed amount during investigation

Full Regulation Z Guide →

Fair Credit Billing Act (FCBA)​

The FCBA amended TILA in 1974 and is implemented through Regulation Z. It specifically addresses:

  • Formal billing error procedures
  • Prohibition on adverse credit reporting during disputes
  • Acknowledgment and investigation requirements
  • Consumer's right to withhold payment on disputed amount

The FCBA is why credit cards have formal written dispute procedures. While rarely referenced by name in network documentation, it underlies every credit card dispute process.

Why Merchants Should Understand​

Anticipate Dispute Outcomes​

Reg Z covers merchandise disputes; Reg E doesn't. This explains why:

  • Credit card disputes for quality/non-delivery are valid dispute reasons
  • Debit card disputes are limited to unauthorized transactions
  • "I didn't receive my order" works on credit, not debit

Prepare Better Evidence​

Knowing that issuers must "investigate" helps you prepare compelling evidence for representment. Understanding what the issuer is required to consider shapes your documentation strategy.

Set Customer Expectations​

  • Explain realistic timelines to frustrated customers
  • Direct customers to appropriate channels
  • Resolve issues before they become formal disputes

Evaluate Payment Method Risk​

  • Credit is "safer" for consumers (fixed $50 vs. escalating debit liability)
  • Some consumers prefer credit for large purchases specifically for this protection
  • This drives different dispute patterns by payment method

Comparison Table​

AspectReg E (Debit)Reg Z (Credit)
Consumer liability max$50 → $500 → unlimited$50 statutory; $0 in practice
Reporting deadline60 days from statement60 days from statement
Notice formatOral or writtenWritten only
Investigation period10-45 days (or 90)2 billing cycles (max 90 days)
Provisional creditRequired if investigation extendedNot required
Merchandise disputesNot coveredCovered (with conditions)
Collection during disputeConsumer funds already goneCannot collect on disputed amount