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Subject:  Re: Consumer Dispute becomes Credit Problem? Date:  12/11/2012  7:26 PM
Author:  joelcorley Number:  306513 of 312189


You wrote, I am involved in a consumer dispute with an online merchant. Their website mentioned a 100% product guarantee, but they are unwilling to send me return instructions for returning the item in question.

I filed a dispute with my credit card issuing bank. This bank likes me a lot because I give them a lot of business and always pay early or on time. In the rare cases that I have had disputes, they usually credit me immediately and charge back the merchant.

You have a right to do this under the Fair Credit Billing Act. However, I'm not entirely sure if it relieves you of an obligation to pay the merchant.

Also, This time the merchant has been charged back and has now sent me a nasty email indicating she intends to turn me over to the credit bureaus with a negative commment....

Um....I paid for the item, in a timely manner.

Do merchants wield this much power that they can send negative information to the credit bureaus over a consumer product dispute - NOT a financial/payment dispute?

Technically the merchant can be viewed as a creditor, so yes they can report something about you to the CRAs. In this case it sounds like she's going to claim you failed to pay for merchandise received.

Others may correct me, but I was under the impression that the credit card merchant agreement forbids this type of action if the credit card company finds against the merchant in a dispute. The reason for this is that the Fair Credit Billing Act allows you to hold the credit card company jointly liable for damages incurred by the merchant. In this case, you could have *theoretically* sued them for damages associated with the merchant's failure to honor her warranty. (Though it sounds like at least the explicit warranty fairly ambiguous.)

However, the ability to charge back against a merchant account is not protected by Federal Law. It is a contractual right held by the credit card company in the merchant agreement. I was under the impression that such contracts held clauses that covered the credit card companies in cases where the credit card company would have been liable under the FCBA. I was also under the impression that such clauses prevent the merchant from taking adverse actions against you because such actions could be treated as damages by a court, which could once again invoke provisions of the FCBA.

However I'm not a lawyer and I've never actually read a merchant agreement, so I don't know the details of that agreement ... so what I'm telling you about that agreement is just hearsay.

As a course of action, I think you should forward her email to your credit card company and CC her so she knows you're keeping them involved. You should also offer once again to return the merchandise if it will satisfy the dispute. If neither are acceptable, you may have to fight it with the CRAs ... or retain an attorney and see if a lawsuit (or the threat of one) might be in order.

BTW, if you had an allergic reaction to the contents of a skin-care product and appropriate warnings were not clearly shown by the seller and/or on the product, you may have a claim of defective merchandise and an implied warranty of merchandise-ability. Indeed from what little I understand, failing to provide appropriate warnings could expose the seller to negligence / product liability claims from people that are seriously injured by these skin-care items. Proper testing and labeling are necessary in the USA to avoid the tort claims that can ensue.

FWIW, pretty much anyone can report on your credit report. They are not supposed to maliciously lie on them. That's called liable. Unlike most cases of liable, the process of resolving disputes on a credit report is regulated by the Fair Credit Reporting Act (and some state statutes). Credit reporting agencies and businesses are protected from most liable claims by this Act in exchange for following a strict set of rules for handling disputes. When they fail to follow the rules, the FCRA provides for legal fees (uncommon in most civil cases), statutory and in some cases punitive damages.

If the merchant files a claim with the FCRAs, you should be able to file a dispute and win with the credit card company's ruling as evidence. (You will need their ruling in writing.) If the CRA(s) rule against you, you should be able to sue them and the merchant for damages. Of course it might be worth consulting a lawyer if it gets to that point. However, in many states you can pursue such litigation in small claims court without a lawyer. And obviously just because you *CAN* sue doesn't mean you will win...

But at least now you know there are rules and a process for this kind of thing. Some might argue that it might not be entirely fair; but it's pretty good and it's also what we have to work with.

- Joel
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