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Collection Actions: Title, Chapter, Part

Title 26—Internal Revenue Code

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Chapter 1—Normal Taxes and Surtaxes

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Part I—General Rule

§ 501 Exemption from tax on corporations, certain trusts, etc.

Truth in Lending: 12(c) Right of Cardholder To Assert Claims or Defenses Against Card Issuer.

1. Relationship to § 1026.13. The § 1026.12(c) credit card “holder in due course” provision deals with the consumer’s right to assert against the card issuer a claim or defense concerning property or services purchased with a credit card, if the merchant has been unwilling to resolve the dispute. Even though certain merchandise disputes, such as non-delivery of goods, may also constitute “billing errors” under § 1026.13, that section operates independently of § 1026.12(c).

Truth in Lending: 12(c)(1) General Rule.

1. Situations excluded and included.94 The consumer may assert claims or defenses only when the goods or services are “purchased with the credit card.” This would include when the goods or services are purchased by a consumer using a hybrid prepaid-credit card to access a covered separate credit feature as defined in § 1026.61. This could include mail, the Internet or telephone orders, if the purchase is charged to the credit card account. But it would exclude:

Truth in Lending: 12(c)(2) Adverse Credit Reports Prohibited.

1. Scope of prohibition. Although an amount in dispute may not be reported as delinquent until the matter is resolved:

i. That amount may be reported as disputed.

ii. Nothing in this provision prohibits the card issuer from undertaking its normal collection activities for the delinquent and undisputed portion of the account.

Truth in Lending: 12(c)(3)(ii) Exclusion.

1. Merchant honoring card. The exceptions (stated in § 1026.12(c)(3)(ii)) to the amount and geographic limitations in § 1026.12(c)(3)(i)(B) do not apply if the merchant merely honors, or indicates through signs or advertising that it honors, a particular credit card.

Truth in Lending: 12(d) Offsets by Card Issuer Prohibited.

1. Meaning of funds on deposit.96 For purposes of § 1026.12(d), funds of the cardholder held on deposit include funds in a consumer’s prepaid account as defined in § 1026.61. In addition, for purposes of § 1026.12(d), deposit account includes a prepaid account.

Paragraph 12(d)(1)

Truth in Lending: 12(e) Prompt Notification of Returns and Crediting of Refunds.

Paragraph 12(e)(1)

1. Normal channels. The term normal channels refers to any network or interchange system used for the processing of the original charge slips (or equivalent information concerning the transaction).

Paragraph 12(e)(2)

1. Crediting account. The card issuer need not actually post the refund to the consumer’s account within three business days after receiving the credit statement, provided that it credits the account as of a date within that time period.

Truth in Lending: Amendment History

[68 Fed. Reg. 16,189 (Apr. 3, 2003); 74 Fed. Reg. 5244 (Jan. 29, 2009); 75 Fed. Reg. 7848 (Feb. 22, 2010); 75 Fed. Reg. 7925 (Feb. 22, 2010); 76 Fed. Reg. 23,019 (Apr. 25, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 81 Fed. Reg. 84,369 (Nov. 22, 2016); 82 Fed. Reg. 18,975 (Apr. 25, 2017); 83 Fed. Reg. 6364 (Feb. 13, 2018)]

Truth in Lending: 1. Creditor’s failure to comply with billing error provisions

1. Creditor’s failure to comply with billing error provisions. Failure to comply with the error resolution procedures may result in the forfeiture of disputed amounts as prescribed in section 161(e) of the Act. (Any failure to comply may also be a violation subject to the liability provisions of section 130 of the Act.)

Truth in Lending: 2. Charges for error resolution

2. Charges for error resolution. If a billing error occurred, whether as alleged or in a different amount or manner, the creditor may not impose a charge related to any aspect of the error resolution process (including charges for documentation or investigation) and must credit the consumer’s account if such a charge was assessed pending resolution.

Truth in Lending: 13(a) Definition of Billing Error.

Paragraph 13(a)(1)

1. Actual, implied, or apparent authority. Whether use of a credit card or open-end credit plan is authorized is determined by state or other applicable law. (See comment 12(b)(1)(ii)-1.)

Paragraph 13(a)(3)

1. Coverage.

i. Section 1026.13(a)(3) covers disputes about goods or services that are “not accepted” or “not delivered * * * as agreed”; for example:

Truth in Lending: 13(b) Billing Error Notice.

1. Withdrawal of billing error notice by consumer. The creditor need not comply with the requirements of § 1026.13(c) through (g) of this section if the consumer concludes that no billing error occurred and voluntarily withdraws the billing error notice. The consumer’s withdrawal of a billing error notice may be oral, electronic or written.

Truth in Lending: 13(c) Time for Resolution; General Procedures.

1. Temporary or provisional corrections. A creditor may temporarily correct the consumer’s account in response to a billing error notice, but is not excused from complying with the remaining error resolution procedures within the time limits for resolution.

Truth in Lending: 13(d) Rules Pending Resolution.

1. Disputed amount. Disputed amount is the dollar amount alleged by the consumer to be in error. When the allegation concerns the description or identification of the transaction (such as the date or the seller’s name) rather than a dollar amount, the disputed amount is the amount of the transaction or charge that corresponds to the disputed transaction identification. If the consumer alleges a failure to send a periodic statement under § 1026.13(a)(7), the disputed amount is the entire balance owing.

Truth in Lending: 13(d)(2) Adverse Credit Reports Prohibited.

1. Report of dispute. Although the creditor must not issue an adverse credit report because the consumer fails to pay the disputed amount or any related charges, the creditor may report that the amount or the account is in dispute. Also, the creditor may report the account as delinquent if undisputed amounts remain unpaid.

Truth in Lending: 13(e) Procedures If Billing Error Occurred as Asserted.

1. Correction of error. The phrase as applicable means that the necessary corrections vary with the type of billing error that occurred. For example, a misidentified transaction (or a transaction that is identified by one of the alternative methods in § 1026.8) is cured by properly identifying the transaction and crediting related finance and any other charges imposed. The creditor is not required to cancel the amount of the underlying obligation incurred by the consumer.

Truth in Lending: 13(f) Procedures If Different Billing Error or No Billing Error Occurred.

1. Different billing error. Examples of a different billing error include:

i. Differences in the amount of an error (for example, the customer asserts a $55.00 error but the error was only $53.00).

ii. Differences in other particulars asserted by the consumer (such as when a consumer asserts that a particular transaction never occurred, but the creditor determines that only the seller’s name was disclosed incorrectly).

Truth in Lending: 13(g) Creditor’s Rights and Duties After Resolution.

Paragraph 13(g)(1)

1. Amounts owed by consumer. Amounts the consumer still owes may include both minimum periodic payments and related finance and other charges that accrued during the resolution period. As explained in the commentary to § 1026.13(d)(1), even if the creditor later determines that no billing error occurred, the creditor may not include finance or other charges that are imposed on undisputed balances solely as a result of a consumer’s withholding payment of a disputed amount.

Truth in Lending: Amendment History

[65 Fed. Reg. 17,131 (Mar. 31, 2000); 74 Fed. Reg. 5244 (Jan. 29, 2009); 75 Fed. Reg. 7848 (Feb. 22, 2010); 75 Fed. Reg. 7925 (Feb. 22, 2010); 76 Fed. Reg. 23,019 (Apr. 25, 2011); 76 Fed. Reg. 79,772 (Dec. 22, 2011); 81 Fed. Reg. 84,369 (Nov. 22, 2016); 82 Fed. Reg. 18,975 (Apr. 25, 2017); 83 Fed. Reg. 6364 (Feb. 13, 2018)]

Truth in Lending: 14(a) General Rule.

1. Tolerance. The tolerance of 1/8th of 1 percentage point above or below the annual percentage rate applies to any required disclosure of the annual percentage rate. The disclosure of the annual percentage rate is required in §§ 1026.60, 1026.40, 1026.6, 1026.7, 1026.9, 1026.15, 1026.16, 1026.26, 1026.55, and 1026.56.

Truth in Lending: 14(b) Annual Percentage Rate—In General.

1. Corresponding annual percentage rate computation. For purposes of §§ 1026.60, 1026.40, 1026.6, 1026.7(a)(4) or (b)(4), 1026.9, 1026.15, 1026.16, 1026.26, 1026.55, and 1026.56, the annual percentage rate is determined by multiplying the periodic rate by the number of periods in the year. This computation reflects the fact that, in such disclosures, the rate (known as the corresponding annual percentage rate) is prospective and does not involve any particular finance charge or periodic balance.