Billing Errors

Protecting Against Billing Abuse

A Consumer Guide

Often, companies caught making mistakes on their bills blame the problem on "computer error" -- as if the company wasn't responsible for the problem. But computer generated errors can always be traced to people, be they programmers, engineers, or those who enter the data into the computer. The saying in the computer industry is: 'garbage in, garbage out.'

Either way they're bad news. Many consumers simply ignore billing problems, thinking it's not worth the bother making phone calls and writing letters to try to rectify the difficulty. That's a bad idea. Honest and reputable companies want to know about billing problems -- they want to keep their customers satisfied. The less virtuous companies rely on the inconvenience to deter customers from complaining -- and will continue the abuse as long as they can get away with it.

Being a smart and savvy bill-payer is easy. The following pages contain the tips and information you need to quickly detect and resolve billing problems. You'll also learn where to go for more help. A few minutes' reading could save you money the next time you pay a bill.

1. The Major Types Of Billing Problems & How To Detect Them

There are six major categories of billing problems; when you sit down to pay your bills, these are what to watch out for.

1. Unitemized Bills-- These are one-page bills which contain nothing more than a few totals -- they're essentially useless because they make it difficult to determine the accuracy of the charges. When you get a bill, ask yourself: Is the price of each product or service ordered listed individually, so that I can identify it, or have I been given only a total amount due? Examples:

* A California woman received a one-line bill for $36,000 for a hospital visit. When she demanded an itemized bill, she discovered two erroneous charges for $15,000 each.
* An entertainment lawyer billed his client $775 for "meetings... telecons and correspondence...additional conferences, telephone conferences, correspondence and memoranda..."
* A woman hospitalized for a hip replacement received a bill for $21,655; dozens of the charges on the bill were listed simply as "Miscellaneous -- $999.99" or "Supply Charges." When she added the "Supply Charges" up, they did not amount to the subtotal on the bill.

2. Indecipherable Bills-- Many bills are so complicated and inscrutable as to simulate a foreign language or a secret code. Like unitemized bills, they shield themselves from adequate scrutiny and prevent consumers from comparing products or services with competitors.

Most indecipherable bills contain terms which are undefined or have no intrinsic meaning, making it impossible to determine whether the charge was calculated correctly. Ask yourself when reading the bill: do I understand how they calculated the charge in question? Examples:

* Monthly telephone bills from GTE bill local call charges by multiplying the length of the call in minutes by a meaningless numerical unit that equals the cost of the call.
* One five-page hospital bill contained so many indecipherable items that it was incomprehensible even to a medical doctor also trained as a lawyer.
* An AT&T bill for telephone equipment used by a small business coded all the items in serial numbers rather than product names, so that it was unidentifiable.

3. Overcharges-- Many bills contain grossly-inflated charges for legitimate products and services. Many consumers forget to look at the amount in question, particularly on bills containing many charges. When paying a bill, make a mental check to make sure the charge on the bill is the price you agreed to. And compare the charge to any receipts you received at the time of purchase. Examples:

* A waiter in a New York restaurant added $10 to the tip on a dinner charged on an American Express Card by changing a digit on the receipt; the cardholder caught the mistake by comparing it to the original.
* A Memphis, Tennessee woman brought her car into a gas station to have the brakes checked and was given a bill for $612 for repairs she had not requested.
* A California utility company overcharged one consumer by 100%-300% twice within six months. On one occasion, the company claimed it was a "computer error."

4. Phony Charges-- Some bills contain imaginary or "phantom" charges for items never ordered by the consumer. And some companies send out materials which look and read like bills, but are only solicitations. Don't be fooled by letters asking you to pay for items you haven't ordered yet, or suggesting that your "account will lapse" if you don't pay right away. Always ask yourself: did I ask for AND RECEIVE the item charged for?

WARNING: Many classic mail-order scams involve billing for products or service not ordered. Beware!

* A Roanoke, Virginia couple answered an ad for a $100 round-trip airplane flight to Hawaii -- and ended up being billed an additional $325 for ten pen and pencil sets on their VISA card.
* A Columbus, Ohio woman received outpatient surgery but was charged for a semi-private room for two days; she was also billed for an oral thermometer, use of a prep room and anesthetic services she never received. Since her husband happened to be a doctor at the same hospital, the administrator of the hospital agreed to review the bill. She received a refund of $581.60 -- about 25% of the total bill.
* A California woman treated at a hospitaL emergency room for a dog bite was charged $56 for an electro-cardiogram (EKG) she never received.
* A vacationing consumer rented a car from General Rent A Car in Orlando, Florida and paid for it by credit card. The agency added an extra day's rental to the charges; when the consumer complained to the credit card company and the rental agency, he was told, "this happens often." While the credit card company reversed the second charge, it still charged him interest on the amount.

5. Interest on Billing Mistakes-- As in the last example, many billing errors are often only partly rectified, leaving the consumer to incur the interest costs, late fees or other penalties for the company's own mistake. Whenever you catch a billing mistake, always check on subsequent bills to make sure you're not being charged interest on the erroneous item, or other penalties for non-payment of a mistaken charge.

* A Minneapolis bank erroneously debited a customer's checking account $500 two months in a row. The bank reversed the charges, but failed to reverse the overdraft and penalty fees which occurred when the balance fell below the minimum as a result of the mistake.
* Shortly after moving into new office space, a Utah business received a utility bill for $15,000 in interest charges tabulated since 1906.

6. Bill Processing Charges-- The latest wrinkle in the arena of billing abuse, the 'processing charge' is appearing on computerized bills with increasing frequency. (Note that these are not the same as small fees for installment payments, which are a form of interest on a loan).

Processing charges are nothing more than an effort to bill you for the cost of billing you -- a cost which used to be calculated into the price of a product or service. And many bill processing charges bear little or no relationship to the actual cost of preparing and mailing the bill.

Processing charges are a way to charge you a higher price than you agreed to for a product or service you have purchased. Like "postal and handling charge" abuses, they can substantially increase your costs.

If the total on a bill is slightly higher than it should be, check to see whether a "billing fee" or "processing charge" has been added in. Examples:

* A Los Angeles woman rented a TV while in the hospital; the television leasing company, a subcontractor of the hospital, charged her a $2 "billing fee" in addition to the $36 rental.
* A car buyer in Irwin, Pennsylvania negotiated a deal for a new Oldsmobile; when he looked at the bill, the dealership had added a $50 paperwork fee.

Catching billing mistakes is half the battle; the other half is getting them fixed. The next section will explain how to do it.

2. How To Get Your Bill Repaired/How To Fix Those Billing Mistakes/How To Resolve Billing Disputes

Resolving billing disputes is a step-by-step process that begins with a phone call. Most of the time, that's where it will end; sometimes, however, you'll have to go further. There are plenty of options, and we'll note each of them and tell you how to proceed. These are proven techniques we've used to resolve billing mistakes.

Step 1. Read What the Bill Says You Should Do in Case of Error.

Once you've found a billing problem -- or even if you simply don't understand the bill -- you'll need to contact the company. Many bills include a statement explaining how to do this. Examine the bill to see whether it contains such a statement.

Some state and federal statutes provide consumers with specific rights when it comes to billing errors -- this is true particularly in the credit, banking and utility areas. Such laws usually require companies to print a statement on each bill telling you how to protect your rights.

Always follow the procedures listed, particularly concerning deadlines for filing a written complaint, if required. At the same time, the following steps will help you establish your complaint, regardless of what procedures, if any, you're supposed to follow.

Step 2. Call the Company.

It's always best to contact the company by phone first. Why? Because when you speak to a company employee, you are in effect investing him or her with personal responsibility for resolving your problem. It's a psychological factor that helps ensure you'll get immediate individual attention.

Also, correspondence takes time -- and many companies would rather resolve things quickly by phone than have employees' time spent in writing correspondence. Some companies simply refuse to acknowledge letters.

If the company is located in a distant city, check the bill or "800" information to see if they operate a toll-free number. If not, you can always try to call collect. When you call, explain that you have a billing problem and ask to speak to the person who can resolve it.

Step 3. Explain your Problem, And How You Want It Fixed

Once you're talking to the right person, give the date of the bill and explain the problem in detail. Make sure the person you're talking with has a copy in front of him --so they can see the problem and make the correction right away.

If your bill is unitemized or indecipherable, ask for an explanation of the charges. If you have any doubts, or if the list is long or complicated, demand a fully-itemized and explained bill.

If your bill contains overcharges or phony charges -- including undisclosed bogus charges for "bill processing" -- demand that they be eliminated from the bill -- make sure they also remove any interest charges or penalty fees at the same time. Ascertain from the person the correct amount you owe, and agree you'll pay that amount.

Make sure you write down the names of each person you speak with, and what they say.

Step 4. If You Have a Problem, Ask for a Supervisor

Never accept poor performance or rude behavior from the person you are speaking with, no matter who he or she is. All too frequently, either because of poor training or bad judgement, corporate employees forget that without you, the consumer, they're out of business.

If you have trouble with the person you speak to -- if they appear uninterested in your problem, or refuse to help, or don't know how to help -- ask politely to speak with their supervisor. Use their name when you do so.

Many times, just making the request to speak with a superior will get you the attention you deserve from the person you are speaking to. Most employees do not want to appear incompetent to their bosses, and will work harder to help you in order to avoid bothering their superiors.

Be polite but very firm when you speak to superiors. Make sure you explain why you asked to speak with them, and indicate your displeasure at the poor performance of the person you spoke with before. Let them know you intend to do everything necessary to resolve the problem -- and expect the same from them.

Finally, note that supervisors have superiors too. If you have to, work your way right to the top. Many corporate executives are insulated from those in their company who deal directly with the public -- and they would want to know if employees are doing a poor job of it. Sometimes, corporate leaders have Administrative Assistants or Executive Secretaries who can handle a crisis situation that arrives at the top. They can be very helpful, and will usually do everything they can to avoid having to badger the chief executive.

Step 5. Write a Note and Pay the Bill

Once you're rectified the problem, pay the bill.

Even if you're sure you've taken care of the mistake, it's always advisable to note in writing -- either on the bill or in a separate letter -- the mistake, and who you talked to at the company.

If you're sure the problem has been taken care of, a few lines scribbled on the bill will suffice. For example, write, "per conversation with John Doe, 11/4/85, I am enclosing $23 instead of $25, because of mistaken billing."

But if the mistake is complicated, sizeable, or if you think the person you spoke with might not adjust the bill correctly, then write a letter to the person directly. Refresh their memories about the phone conversation, state the agreement reached, and enclose the bill and check. Letters are a particularly good way of following up, since they can serve as proof of your efforts should problems arise later.

Whenever federal or state law requires you put a complaint in writing, do so -- even if it's just to acknowledge a phone conversation resolving the matter.

Step 6. If the Company Won't Fix Your Problem

Most billing problems can be resolved by dealing directly with the company in a forthright, persistent and determined matter. Virtually all companies will correct their mistakes if you insist on it.

Still, some companies -- either dishonest firms, or those which are simply insensitive to consumers -- will refuse to help you out. You have several choices:

You can give up and pay. You lose, and so do other consumers who will be abused by the company.

You can refuse to pay. If the company believes it's correct, it may take you to court. Companies which abuse consumers will rarely go to court, however, for obvious reasons. Be aware, however, that even if the company declines to come after you, it might still be able to impair your credit rating, which can have negative effects. State and federal laws govern reports to credit bureaus and prohibit false reports to credit rating bureaus.

You can sue. If you've already paid a mistaken amount, or if you want to avoid affecting your credit rating no matter what, you can sue the company. Most states maintain small claims courts which allow citizens to sue without lawyers and without any technical knowledge of law -- all you need is your bill and accompanying letters to the company (the more detailed the records are, the better). Small claims courts are usually limited to case involving a thousand dollars or less; if the dispute involves a large amount of money, you may wish to hire an attorney.

You can seek other help. In many cases, government agencies can assist you with a dispute. (In fact, in certain areas, such as utility bills, state law may require you to appeal first to a government agency, such as the utility commission, before you go to court). Many states and large cities have consumer protection departments; some non-profit public interest organizations will assist consumers; state bar associations frequently offer legal assistance to those who cannot otherwise obtain or afford it; and a list of key federal agencies is included in the Resources section below.

Finally, where fraud or other criminal activity is involved, contact the local police, district attorney, state attorney general's office, and the U.S. Postal Service, if the mails are involved.

Note when you seek government agency assistance: this can be a time-consuming process, and you may have to be almost as insistent about getting their help as you were with the company involved.

3. Resources -- Who To Contact For More Help

If you need help, you may wish to contact any of the following agencies:

National

Federal Trade Commission -- Credit card, charge account and other billing problems covered by the Fair Credit Billing Act; credit report and debt collection practices. It's always best to contact a regional office of the FTC. Or you can write to the headquarters in Washington: 6th & Pennsylvania Avenue, N.W., Washington, D.C., 20580.

Federal Reserve System -- For general problems concerning banking matters, contact the Division of Consumer & Community Affairs, Board of Governors of the Federal Reserve System, Washington, D.C. 20551.

U.S. Postal Service -- For fraudulent or deceitful bills or scams sent through the U.S. Mail. Contact your local post office and ask to speak with a Postal Inspector.

Congressional Representatives -- Your U.S. Congressman or Senator employs special staff to assist constituents who are involved in serious disputes, particularly with federal agencies. They may be able to help. Contact their local offices first (check the phonebook) or call their Washington office at (202) 224-3121.

Local

State Utility Regulatory Commissions -- Most states have separate agencies which handle utility rate cases and customer billing disputes.

Elected Local Officials -- Like their federal counterparts above, elected officials can often intervene to settle disputes. Find their offices in the telephone book.

Departments of Consumer Affairs -- Many states, and even some large counties and cities, maintain consumer affairs departments staffed by trained experts who can provide advice and will sometimes assist you directly with a billing dispute. Check the phone book.

Consumer Groups -- Private, non-profit consumer groups or similar organizations often have lawyers or consumer specialists who can help you. They are usually listed in the phone book, or call local newspapers to get their number.

News Media -- Don't forget to contact local newspapers or tv and radio stations; some offer consumer assistance, or they may be interested enough to do a report on the matter. The media is a good avenue to warn other consumers to avoid particular problems.

State Bar Associations -- Frequently, these lawyers' organizations will help you find an attorney, or can refer you to other organizations which will do so. Let them know if you are unable to pay, since they may have special services in such cases.

State Attorney General -- These offices can be very helpful, particularly if many consumers are involved, or if fraud or other criminal activity is suspected.

Police -- If you are the victim of a fraud, theft, or other crime, contact the police.

4. "Truth in Billing" Reform: A Bill-Payers' Bill Of Rights

With the exception of federal laws governing financial institutions' disclosure and billing practices, consumers have relatively little statutory protection against billing abuse. A few states have enacted so-called "plain english" rules requiring that contracts be written in non-legalese; some state utility agencies also mandate readable bill formats. Generally, however, consumers with billing problems they can't resolve either have to go to court, which can be expensive and time-consuming, or give up and pay.

The attention of lawmakers to this issue is long overdue. Consumers are entitled to the protection of a Bill-Payers' Bill of Rights, which FTCR is presently drafting for model legislation.

The following is an outline of the "Truth in Billing" proposal. We welcome your comments and suggestions.

1. All bills must be fully itemized.
2. Terms of bills should be standardized to enable consumers to compare product and service prices from bill to bill and between companies. All units of measurement should be defined on the bill.
3. All calculations should be explained on the bill.
4. A consumer's right to protest billing problems or errors under applicable laws should be noted on the bill, along with the name and telephone number of a person or office within the company to whom billing inquiries can be directed.
5. Companies should be required to respond to billing inquiries within a specified period of time.
6. To deter companies from abusive billing practices, firms which fail to rectify verified billing errors within a short period of time should be subject to triple damages, with an appropriate minimum fine and liability for attorney's fees.
7. Criminal penalties should be assessed against companies which repeatedly and systematically provide erroneous bills or violate any of the foregoing provisions.
8. A Consumer Protection Board should be established. All companies which regularly bill for their products or services should be required to periodically enclose notices inviting consumers to join a consumer-controlled organization operated to represent consumers and small businesses in billing and related disputes.

Important Information About Submissions to FTCR:

These pages should not be construed to contain legal advice. Because of our extremely limited resources, we are unable to respond to most requests for advice or help with billing problems. While we will treat any information provided as privileged and confidential if you ask us to do so, you should understand that when you provide information to FTCR, we do not become your attorneys. With your permission, we may use your information to investigate the matter you bring to our attention. However, our litigation department brings a very limited number of legal actions each year and thus if you believe you require legal assistance you should contact a lawyer immediately. If we are interested in representing you, we will contact you at the address and telephone you provide.