Guide to Online Payments

The Internet has taken its place next to the telephone and television as an important part of people’s lives. Every day, more consumers are using the Internet for financial activities like investing, banking, and shopping. How do they do it? Most use charge, credit or debit cards to pay for their online purchases. Increasingly, however, new payment methods are becoming more common.

America Online and the Federal Trade Commission have written this brochure to tell you more about ways to pay for goods and services online and how to make sure your transactions are safe.

New Ways to Pay
Although credit and charge cards are the most common ways to pay for purchases online, debit cards – which authorize merchants to electronically debit your bank account – are being used as well. Your debit card may be your automated teller machine (ATM) card and may require you to use a personal identification number (PIN). It may be a card that requires only some form of signature or other identification; or it may have a combination of these features. While using a debit card is similar to using a credit card, there is one important difference: when you use a debit card, the money for the purchase is transferred almost immediately from your bank account to the merchant’s account.

One of the hallmarks of the online world is change. So it’s no wonder that a number of electronic payment systems – sometimes referred to as “electronic money” – are under development for simplifying purchases online. For example, “stored-value” cards allow consumers to transfer cash value to the card. Some stored value cards work offline (say, to buy a candy bar at a vending machine); others work online (to buy an item from a web site); or they may have both features. Some stored value cards contain computer chips that make them “smart” cards: They can act like a credit card as well as a debit card, and can also contain stored value.

Some new Internet-based payment systems would allow value to be transmitted through computers. Consumers can use them to make “micropayments” – extremely small payments – for an item like a sheet of music. When consumers use electronic money to make a purchase, they decrease the balance on their card or computer by the amount of the purchase. Some cards can be “reloaded” with additional value, say, at a cash machine; other cards are “disposable” – you can throw them away after you use them.

Paying Safe
When you make purchases online, make sure your transactions are secure, your personal information is protected, and your fraud sensors are sharpened. Although you can’t control fraud or deception on the Internet, you can take steps to recognize it, avoid it, and report it. Here’s how:

  • Use a secure browser – software that encrypts or scrambles the purchase information you send over the Internet – to guard the security of your online transactions. Most computers come with a secure browser already installed. You also can download some browsers for free over the Internet.
  • Keep records of your online transactions. Read your e-mail – merchants may send you important information about your purchases.
  • Be prompt about reviewing your monthly bank and credit card statements for any billing errors or unauthorized purchases. Notify your credit card issuer or bank immediately if your credit card or checkbook is lost or stolen.
  • Read the policies of Web sites you visit – especially the disclosures about a Web site’s security, its refund policies, and its privacy policy on collecting and using your personal information. Some Web sites’ disclosures are easier to find than others are – look at the bottom of the home page, on order forms, or in the “About” or “FAQs” section of a site. If you can’t find a privacy policy, consider shopping elsewhere.
  • Keep your personal information private. Don’t disclose your personal information – your address, telephone number, Social Security number, or e-mail address – unless you know who’s collecting the information, why they’re collecting it, and how they’ll use it.
  • Give payment information only to businesses you know and trust, and only in appropriate places like order forms.
  • Never give your password to anyone online, even your Internet service provider.
  • Do not download files sent to you by strangers or click on hyperlinks from people you don’t know. Opening a file could expose your system to a computer virus.

Correct Problems & Errors Immediately
It is important to check your credit account and bank account statements regularly. The statements could contain mistakes that might damage your credit status or reflect improper charges or transfers. If you find an error or discrepancy, notify the financial institution and contest the error immediately. While it may be helpful to notify the company by e-mail or telephone to quickly report a problem, you also should send a written notice by mail to ensure your federal rights are protected. Send written notices by certified mail, return receipt requested, and keep a copy of your letter for your own files.

The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for resolving mistakes on credit account and bank account statements, respectively, including:

  • credit charges or electronic fund transfers that you – or anyone you have authorized to use your account – have not made;
  • credit charges or electronic fund transfers that are incorrectly identified or show the wrong amount or date; computation or similar errors;
  • a failure to properly reflect payments or credits, or electronic fund transfers;
  • not mailing or delivering credit billing statements to your current address, as long as that address was received by the creditor in writing at least 20 days before the billing period ended;
  • credit charges or electronic fund transfers for which you request an explanation or documentation, because of a possible error.

For credit: The FCBA generally applies to “open end” credit accounts – that is, credit cards, revolving charge accounts (such as department store accounts), and overdraft checking accounts. It does not apply to loans or credit sales that are paid according to a fixed schedule until the entire amount is paid back, such as an automobile loan.

Under the FCBA, your liability for lost or stolen credit cards is limited to $50, and you have the right to dispute charges on your bill. To do so, you must send a letter explaining the disputed item to the creditor at the address on the statement for billing error notices. Your letter must include you name, account number, a statement that you believe the bill contains a billing error and the dollar amount involved, and the reasons you believe there is a mistake. The letter must reach the creditor within 60 days after the first bill containing the disputed item was mailed to you.

The creditor must acknowledge your dispute in writing within 30 days after it is received, unless the problem is resolved within that period. The creditor must conduct an investigation and either correct the mistake or explain why the bill is believed to be correct, within two billing cycles (but not more than 90 days), unless the creditor provides a permanent credit instead. You may withhold payment of the amount in dispute and any related finance charges – and the creditor may not take any action to collect that amount – during the dispute.

For debit: The EFTA applies to electronic fund transfers – transactions involving automated teller machines (ATMs), debit cards and other point-of-sale debit transactions, and other electronic banking transactions that can result in the withdrawal of cash from your bank account.

Under the EFTA, if there is a mistake or unauthorized withdrawal from your bank account through the use of a debit card (an electronic fund transfer), you must notify your financial institution of the problem or error within 60 days after the statement containing the problem or error was sent. For retail purchases, your financial institution has up to 20 business days to investigate after receiving notice of the error. The financial institution must tell you the results of its investigation within three business days of completing the investigation. The error must be corrected within one business day after determining the error has occurred. If the institution needs more time, it may take up to 90 days to complete the investigation – but only if it returns the money in dispute to your account within 20 business days after receiving notice of the error.

If someone uses your debit card without your permission, you can lose from $50 to $500, depending on when you report the loss or theft. But if you do not report an unauthorized transfer or withdrawal within 60 days after your statement is sent to you, you risk unlimited loss. Some financial institutions voluntarily cap your liability at $50, regardless of when you report the loss or theft. Ask your financial institution about its liability limits.

For stored-value: The FCBA and the EFTA may not cover stored-value cards or transactions involving them, so you may not be covered for loss or misuse of the card. However, you may want to use stored-value cards for micropayments and other purchases online, because they can be convenient and – in some cases – offer anonymity. Before you buy a stored-value card or other form of electronic money, ask the issuer for written information about the product’s features. Find out the card’s dollar limit, whether it is reloadable or disposable, if there is an expiration date, and any fees to use, reload, or redeem (return it for a refund) the product. At the same time, ask about your rights and responsibilities: does the issuer offer any protection in the case of a lost, stolen, misused, or malfunctioning card; and who do you call if you have a question or problem with the card.

Fiscal Fitness: Choosing a Credit Counselor

Living paycheck to paycheck? Worried about debt collectors? Can’t seem to develop a workable budget, let alone save money for retirement? If this sounds familiar, you may want to consider the services of a credit counseling agency. Usually nonprofit, these agencies work with you to solve your financial problems — sometimes for free. Credit counseling agencies may offer educational materials and workshops, or help you develop a budget. Many agencies offer services nationwide through local offices or the Internet. Look under “credit counseling” in your telephone directory or your Internet search engine.

Debt Repayment Plans
If your financial difficulties arise from too much debt or an inability to repay your debts, a credit counseling agency may work out a Debt Repayment Plan for you. In these plans, you deposit money each month with the credit counseling agency. Your deposits are used to pay your creditors according to a payment schedule the counselor develops with you.

As part of the repayment plan, you may have to agree not to apply for — or use — any additional credit while you’re participating in the program. A successful repayment plan requires you to make regular, timely payments, and could take 48 months or longer to complete. Some credit counseling agencies charge little or nothing for managing the plan; others charge a monthly fee that could add up to a significant charge over time.

A debt repayment plan does not erase your credit history. Under the Fair Credit Reporting Act, accurate information about your accounts can stay on your credit report for up to seven years. A bankruptcy can stay on your report for ten years. In addition, your creditors will continue to report information about accounts that are handled through a debt repayment plan. For example, creditors may report that an account is in financial counseling, that payments have been missed, or that there are write-offs or other concessions. But a demonstrated pattern of timely payments should help you get credit in the future.

Secured and Unsecured Debt
Your debts are either secured or unsecured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, the lender can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset. Examples include most credit card debt, bills for medical care, signature loans and debts for other types of services. Debt repayment plans usually cover only your unsecured debt. If your secured debts are not included in the plan, you must continue to make payments to these creditors directly.

When you borrow money to buy a car, the lender generally holds the title to the car until the debt is paid in full. Most automobile financing agreements allow the lender to repossess your car if you stop making payments. No notice is required. If your car is repossessed, you may have to pay the full balance due on the loan, as well as towing and storage costs, to get it back. If not, the lender may sell the car, perhaps for less than what you still owe. You still are responsible for the difference. If you fall behind with your car payments, consider working with the holder of the title of your car to sell it yourself. Pay off the debt to avoid repossession and a negative entry on your credit report.

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders will work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, you may have to pay extra toward the past due total. Lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly payments. Ask about any fees charged for these changes, and consider how much they add to the total cost of your loan.

If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development (HUD) or the housing authority in your state, city, or county for help in finding a housing counseling agency near you.

Choosing an Agency: Questions to Ask
If you want to work with a credit counseling agency, interview several. Here are some questions to ask. Check with your state Attorney General, local consumer protection agency and the Better Business Bureau to find out if consumers have filed complaints about the provider you are considering. Any reputable credit counseling agency should send you free information about itself and the services it provides without requiring you to provide any details about your situation. If not, consider that a red flag and go elsewhere for help.

Services and Fees

  • What services do you offer?
  • Do you have educational materials? If so, will you send them to me? Are they free? Can I access them on the Internet?
  • In addition to helping me solve my immediate problem, will you help me develop a plan for avoiding problems in the future?
  • What are your fees? Do I have to pay anything before you can help me? Are there monthly fees? What’s the basis for the fees?
  • What is the source of your funding?
  • Will I have a formal written agreement or contract with you?
  • How soon can you take my case?
  • Who regulates, oversees and/or licenses your agency? Is your agency audited?
  • Will I work with one counselor or several?
  • What are the qualifications of your counselors? Are they accredited or certified? If not, how are they trained?
  • What assurance do I have that information about me (including my address and phone number) will be kept confidential?

Repayment Plan

  • How much do I have to owe to use your services?
  • How do you determine the amount of my payment? What happens if this is more than I can afford?
  • How does your debt repayment plan work? How will I know my creditors have received payments? Is client money put in a separate account from operating funds?
  • How often can I get status reports on my accounts? Can I get access to my accounts online or by phone?
  • Can you get my creditors to lower or eliminate interest and finance charges or waive late fees?
  • Is a debt repayment plan my only option?
  • What if I can’t maintain the agreed-upon plan?
  • What debts will be excluded from the debt repayment plan?
  • Will you help me plan for payment of these debts?
  • Who will help me if I have problems with my accounts or creditors?
  • How secure is the information I provide to you?

Fair Debt Collection

If you use credit cards, owe money on a personal loan, or are paying on a home mortgage, you are a “debtor.” If you fall behind in repaying your creditors, or an error is made on your accounts, you may be contacted by a “debt collector.”

You should know that in either situation, the Fair Debt Collection Practices Act requires that debt collectors treat you fairly and prohibits certain methods of debt collection. Of course, the law does not erase any legitimate debt you owe.

This brochure answers commonly asked questions about your rights under the Fair Debt Collection Practices Act.

What debts are covered? 
Personal, family, and household debts are covered under the Act. This includes money owed for the purchase of an automobile, for medical care, or for charge accounts.

Who is a debt collector? 
A debt collector is any person who regularly collects debts owed to others. This includes attorneys who collect debts on a regular basis.

How may a debt collector contact you? 
A collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.

Can you stop a debt collector from contacting you? 
You can stop a debt collector from contacting you by writing a letter to the collector telling them to stop. Once the collector receives your letter, they may not contact you again except to say there will be no further contact or to notify you that the debt collector or the creditor intends to take some specific action. Please note, however, that sending such a letter to a collector does not make the debt go away if you actually owe it. You could still be sued by the debt collector or your original creditor.

May a debt collector contact anyone else about your debt? 
If you have an attorney, the debt collector must contact the attorney, rather than you. If you do not have an attorney, a collector may contact other people, but only to find out where you live, what your phone number is, and where you work. Collectors usually are prohibited from contacting such third parties more than once. In most cases, the collector may not tell anyone other than you and your attorney that you owe money.

What must the debt collector tell you about the debt? 
Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money.

May a debt collector continue to contact you if you believe you do not owe money? 
A collector may not contact you if, within 30 days after you receive the written notice, you send the collection agency a letter stating you do not owe money. However, a collector can renew collection activities if you are sent proof of the debt, such as a copy of a bill for the amount owed.

What types of debt collection practices are prohibited? 
Harassment. 
Debt collectors may not harass, oppress, or abuse you or any third parties they contact. For example, debt collectors may not:

  • use threats of violence or harm;
  • publish a list of consumers who refuse to pay their debts (except to a credit bureau);
  • use obscene or profane language; or
  • repeatedly use the telephone to annoy someone.

False statements
Debt collectors may not use any false or misleading statements when collecting a debt. For example, debt collectors may not:

  • falsely imply that they are attorneys or government representatives;
  • falsely imply that you have committed a crime;
  • falsely represent that they operate or work for a credit bureau;
  • misrepresent the amount of your debt; l indicate that papers being sent to you are legal forms when they are not; or
  • indicate that papers being sent to you are not legal forms when they are.

Debt collectors also may not state that:

  • you will be arrested if you do not pay your debt;
  • they will seize, garnish, attach, or sell your property or wages, unless the collection agency or creditor intends to do so, and it is legal to do so; or
  • actions, such as a lawsuit, will be taken against you, when such action legally may not be taken, or when they do not intend to take such action.

Debt collectors may not:

  • give false credit information about you to anyone, including a credit bureau;
  • send you anything that looks like an official document from a court or government agency when it is not; or
  • use a false name.

Unfair practices. 
Debt collectors may not engage in unfair practices when they try to collect a debt. For example, collectors may not:

  • collect any amount greater than your debt, unless your state law permits such a charge;
  • deposit a post-dated check prematurely;
  • use deception to make you accept collect calls or pay for telegrams;
  • take or threaten to take your property unless this can be done legally; or
  • contact you by postcard.

What control do you have over payment of debts? 
If you owe more than one debt, any payment you make must be applied to the debt you indicate. A debt collector may not apply a payment to any debt you believe you do not owe.

What can you do if you believe a debt collector violated the law? 
You have the right to sue a collector in a state or federal court within one year from the date the law was violated. If you win, you may recover money for the damages you suffered plus an additional amount up to $1,000. Court costs and attorney’s fees also can be recovered. A group of people also may sue a debt collector and recover money for damages up to $500,000, or one percent of the collector’s net worth, whichever is less.

Where can you report a debt collector for an alleged violation? 
Report any problems you have with a debt collector to your state Attorney General’s office and the Federal Trade Commission. Many states have their own debt collection laws, and your Attorney General’s office can help you determine your rights.

Fair Credit Reporting

If you’ve ever applied for a charge account, a personal loan, insurance, or a job, there’s a file about you. This file contains information on where you work and live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy.

Companies that gather and sell this information are called Consumer Reporting Agencies (CRAs). The most common type of CRA is the credit bureau. The information CRAs sell about you to creditors, employers, insurers, and other businesses is called a consumer report.

The Fair Credit Reporting Act (FCRA), enforced by the Federal Trade Commission, is designed to promote accuracy and ensure the privacy of the information used in consumer reports. Recent amendments to the Act expand your rights and place additional requirements on CRAs. Businesses that supply information about you to CRAs and those that use consumer reports also have new responsibilities under the law.

Here are some questions consumers commonly ask about consumer reports and CRAs — and the answers. Note that you may have additional rights under state laws. Contact your state Attorney General or local consumer protection agency for more information.

Q. How do I find the CRA that has my report?

A. Contact the CRAs listed in the Yellow Pages under “credit” or “credit rating and reporting.” Because more than one CRA may have a file on you, call each until you locate all the agencies maintaining your file. The three major national credit bureaus are:

  • Equifax, P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111.
  • Experian (formerly TRW), P.O. Box 949, Allen, TX 75013; (888) EXPERIAN (397-3742).
  • Trans Union, P.O. Box 1000, Chester, PA 19022; (800) 916-8800.

In addition, anyone who takes action against you in response to a report supplied by a CRA — such as denying your application for credit, insurance, or employment — must give you the name, address, and telephone number of the CRA that provided the report.

Q. Do I have a right to know what’s in my report?

A. Yes, if you ask for it. The CRA must tell you everything in your report, including medical information, and in most cases, the sources of the information. The CRA also must give you a list of everyone who has requested your report within the past year — two years for employment related requests.

Q. Is there a charge for my report?

A. Sometimes. There’s no charge if a company takes adverse action against you, such as denying your application for credit, insurance or employment, and you request your report within 60 days of receiving the notice of the action. The notice will give you the name, address, and phone number of the CRA. In addition, you’re entitled to one free report a year (1) you’re unemployed and plan to look for a job within 60 days, (2) you’re on welfare, or (3) your report is inaccurate because of fraud. Otherwise, a CRA may charge you up to $8 for a copy of your report.

Q. What can I do about inaccurate or incomplete information?

A. Under the new law, both the CRA and the information provider have responsibilities for correcting inaccurate or incomplete information in your report. To protect all your rights under this law, contact both the CRA and the information provider.

First, tell the CRA in writing what information you believe is inaccurate. CRAs must reinvestigate the items in question – usually within 30 days — unless they consider your dispute frivolous. They also must forward all relevant data you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the CRA, it must investigate, review all relevant information provided by the CRA, and report the results to the CRA. If the information provider finds the disputed information to be inaccurate, it must notify all nationwide CRAs so that they can correct this information in your file.

When the reinvestigation is complete, the CRA must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the CRA cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the CRA gives you a written notice that includes the name, address, and phone number of the provider.

Second, tell the creditor or other information provider in writing that you dispute an item. Many providers specify an address for disputes. If the provider then reports the item to any CRA, it must include a notice of your dispute. In addition, if you are correct — that is, if the information is inaccurate — the information provider may not use it again.

Q. What can I do if the CRA or information provider won’t correct the information I dispute?

A. A reinvestigation may not resolve your dispute with the CRA. If that’s the case, ask the CRA to include your statement of the dispute in your file and in future reports. If you request, the CRA also will provide your statement to anyone who received a copy of the old report in the recent past. There usually is a fee for this service.

If you tell the information provider that you dispute an item, a notice of your dispute must be included anytime the information provider reports the item to a CRA.

Q. Can my employer get my report?

A. Only if you say it’s okay. A CRA may not supply information about you to your employer, or to a prospective employer, without your consent.

Q. Can creditors, employers, or insurers get a report that contains medical information about me?

A. Not without your approval.

Q. What should I know about “investigative consumer reports”?

A. “Investigative consumer reports” are detailed reports that involve interviews with your neighbors or acquaintances about your lifestyle, character, and reputation. They may be used in connection with insurance and employment applications. You’ll be notified in writing when a company orders such a report. The notice will explain your right to request certain information about the report from the company you applied to. If your application is rejected, you may get additional information from the CRA. However, the CRA does not have to reveal the sources of the information.

Q. How long can a CRA report negative information?

A. Seven years. There are certain exceptions:

  • Information about criminal convictions may be reported without any time limitation.
  • Bankruptcy information may be reported for 10 years.
  • Information reported in response to an application for a job with a salary of more than $75,000 has no time limit.
  • Information reported because of an application for more than $150,000 worth of credit or life insurance has no time limit.
  • Information about a lawsuit or an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer.

Q. Can anyone get a copy of my report?

A. No. Only people with a legitimate business need, as recognized by the FCRA. For example, a company is allowed to get your report if you apply for credit, insurance, employment, or to rent an apartment.

Q. How can I stop a CRA from including me on lists for unsolicited credit and insurance offers?

A. Creditors and insurers may use CRA file information as a basis for sending you unsolicited offers. These offers must include a toll-free number for you to call if you want to remove your name and address from lists for two years; completing a form that the CRA provides for this purpose will keep your name off the lists permanently.

Q. Do I have the right to sue for damages?

A. You may sue a CRA, a user or — in some cases — a provider of CRA data, in state or federal court for most violations of the FCRA. If you win, the defendant will have to pay damages and reimburse you for attorney fees to the extent ordered by the court.

Q. Are there other laws I should know about?

A. Yes. If your credit application was denied, the Equal Credit Opportunity Act requires creditors to specify why — if you ask. For example, the creditor must tell you whether you were denied because you have “no credit file” with a CRA or because the CRA says you have “delinquent obligations.” The ECOA also requires creditors to consider additional information you might supply about your credit history. You may want to find out why the creditor denied your application before you contact the CRA.

Q. Where should I report violations of the law?

A. Although the FTC can’t act as your lawyer in private disputes, information about your experiences and concerns is vital to the enforcement of the Fair Credit Reporting Act. Send your questions or complaints to: Consumer Response Center — FCRA, Federal Trade Commission, Washington, D.C. 20580.

Credit Rules Bookmark

  1. Credit cards are just like a loan-you have to pay what you owe.
  2. Keep track of how much you spend. Remember that incidental and impulse purchases add up fast.
  3. Save your receipts. Compare them with your monthly bill. Promptly report problems to the company that issued the card.
  4. Never lend your card to anyone.
  5. Owing more than you can repay can damage your credit rating. That can make it hard to finance a car, rent an apartment, get insurance-even get a job.
  6. Pay your bill on time, and in full when possible. If you don’t, you’ll have to pay finance charges on the unpaid balance-and it takes forever to get caught up if you just pay the minimum.

Federal law limits your liability for unauthorized charges to $50 per card.