There have not been many cases that have used 15 U.S.C. § 1666i as an affirmative defense, but the cases that have examined the issue uniformly agree that an affirmative defense to a debt collection lawsuit is the proper method for a consumer to assert the right, limited only to the extent that the contested debt remains unpaid. The consumer must make a good-faith attempt to resolve the issue with the merchant, according to the statute. Notice to the credit card issuer is not required.
This is not a billing error issue. This is different, and it specifically descends upon the assignees of the debt. The defendant was entitled to withhold payment.
Statement of the Law – 15 U.S.C. § 1666i (Fair Credit Billing Act Defense)
Specifically, § 1666i(a) provides that a cardholder may assert “all claims (other than tort claims) and defenses arising out of any transaction in which the credit card is used as a method of payment,” but only if:
The cardholder has made a good faith attempt to resolve the dispute with the merchant;
The amount at issue exceeds $50; and
The transaction occurred:
In the same state as the cardholder’s mailing address, or
Within 100 miles of that address.
Further, § 1666i(b) limits the consumer’s right to withhold payment to the amount of credit outstanding for the disputed transaction at the time the cardholder first notifies the card issuer of the dispute. Courts interpreting this provision, most notably in Hasan v. Chase Bank USA, N.A., 880 F.3d 1217 (10th Cir. 2018), have held that “credit outstanding” means the unpaid balance attributable to the disputed transaction at the time of notice. Once the balance is paid in full, the defense is no longer available.
Moreover, courts have uniformly held that § 1666i is defensive in nature. It allows a consumer to withhold payment or assert claims only in certain proceedings, such as:
In response to a debt collection action;
As part of a claim under the Truth in Lending Act (TILA); or
In litigation initiated by the card issuer to recover payment.
This defense may be raised against successors-in-interest, including third-party debt buyers, if they stand in the shoes of the original creditor and are subject to the same legal constraints and limitations, per principles of assignment law.
Elements the Consumer Must Establish to Invoke § 1666i as a Valid Defense
To successfully assert § 1666i as an affirmative defense to a debt collection lawsuit, the consumer must prove the following elements:
The transaction was made using a credit card
The dental services must have been charged using a credit card covered by the FCBA (not a debit card, check, or other payment method).The consumer has a valid, non-tort claim or defense against the merchant
The consumer must show that:Part of the dental services paid for in advance were never rendered; and/or
The services rendered were defective or failed to meet contractual expectations.
The dispute involves more than $50
The amount in controversy must exceed the statutory threshold. This applies to the portion of the transaction the consumer is disputing.The transaction occurred within the statutorily defined geographic limits
The consumer must demonstrate that:The dental services were contracted for in the same state as the cardholder's billing address; or
The merchant was located within 100 miles of that address.
The consumer made a good faith attempt to resolve the dispute with the merchant
This requires evidence of effort to contact or negotiate with the dental provider before asserting the defense, such as:Letters or emails requesting correction or refund;
In-person conversations;
Filing of complaints with relevant licensing or consumer agencies.
The cardholder notified the card issuer while there was still credit outstanding
The consumer must prove that at the time the dispute was raised with the issuer, there remained an unpaid balance on the account related to the disputed dental transaction. If the cardholder had already paid the balance in full, the defense is unavailable (Hasan).The plaintiff is a successor-in-interest to the credit card issuer
If the case is brought by a third-party debt buyer, the consumer must argue that the debt buyer stands in the shoes of the original creditor and is bound by the same defenses, including those under § 1666i (see Moynihan v. Providian and Beaumont v. Citibank).The consumer is asserting the defense to avoid payment—not seeking affirmative relief
Courts limit § 1666i’s application to defensive use only, not for obtaining damages or refunds. The consumer must emphasize that this is an affirmative defense in a collection action.
Other cases that apply or interpret 15 USC 1666i of the Fair Credit Billing Act.
Singer v. Chase Manhattan Bank, 890 P.2d 1305 (Nev. 1995)
Addressed the geographic limitation in 15 USC 1666i(a)(3)
Enforced the statute's 100-mile limit for transactions that occur outside the cardholder's state
Declined to create exceptions to this geographic limitation
Moynihan v. Providian Financial Corp., No. JFM-02-2795 (2003 USDC D. Md.)
https://www.casemine.com/judgement/us/59147913add7b049343f1354
The court in Moynihan explicitly states that "§ 1666i provides cardholders who meet the criteria of 1666i(a) and who possess a valid non-tort claim or defense against a merchant the right to chargeback certain outstanding amounts by withholding payment."
Interpreted 1666i as not creating an independent cause of action
Held that 1666i only allows cardholders to assert claims in three instances: as justification for withholding payment, in lawsuits filed by card issuers to collect, or in connection with TILA violation lawsuits
Concluded that 1666i provides a chargeback right, not an affirmative cause of action
The court explicitly states that "§ 1666i does not create an independent cause of action for a cardholder" but instead only allows cardholders to assert claims against card issuers in three specific instances.
The opinion confirms that § 1666i only permits cardholders to assert claims: "(1) as a justification for withholding payment; (2) in any lawsuit filed by the card issuer to collect on the account; or (3), if appropriate, in connection with a lawsuit brought by the cardholder for a violation of TILA."
The court cites 12 C.F.R. § 226.12(c)(1) to support its interpretation that the FCBA provides cardholders "the right to chargeback certain outstanding amounts by withholding payment."
The opinion specifically notes that "Moynihan did not withhold payment. Rather, he filed this suit seeking affirmative relief against Providian," which is precisely why his claim failed.
The court cites Beaumont v. Citibank as being "directly on point" with regard to this interpretation of § 1666i.
Beaumont v. Citibank, No. 01 Civ. 3393(DLC), 2002 WL 483431 (S.D.N.Y. Mar. 28, 2002) Cause: 28:1331
Referenced by the Tenth Circuit in Hasan
Found that the FCBA is structured to facilitate withholding of payment by cardholder
Determined that if a card issuer sues for payment, a cardholder can use 1666i defensively
---------------------------------oOo---------------------------------
Baker v. Capital One Bank, Cause: 1:12-cv-00971-SEB-DKL (S.D. IN. Nov. 26, 2012)
§ 226.12(c) of Regulation Z. Section 226.12(c) is the implementing regulation for 15 U.S.C. § 1666i, which “allows a cardholder to assert any non-tort claims or defenses arising out of the underlying credit card transaction against a credit card issuer.” Beaumont v. Citibank (S.D.) N.A., No 01. Civ. 3393(DLC), 2002 WL 483431, at *5 (S.D.N.Y. Mar. 28, 2002). However, § 1666i does not create an independent cause of action. Id. at *6-7. Thus, because Baker has not alleged that Capital One committed any independent violation of the TILA under § 1640(e), her claim fails as a matter of law.
---------------------------------oOo---------------------------------
These cases collectively establish that 15 USC 1666i:
1. Has a strict limit on claims based on "credit outstanding" at the time of notification
2. Contains geographical limitations (same state or within 100 miles)
3. Is primarily defensive rather than creating an affirmative cause of action
4. Provides no remedy for consumers who have already paid their credit card bills in full
Conclusion
Taken together, § 1666i provides a narrowly circumscribed but powerful defense for consumers in debt collection lawsuits where they were overcharged or misled by a merchant and acted promptly to dispute the charges. Where properly pled and supported by factual evidence, the defense may wholly or partially bar recovery by a third-party debt buyer seeking payment for the disputed transaction.
- - - - - - -
Thomas Fox, J. D.
Fox Paralegal Services
Lake Cumberland, Kentucky
thomas@foxparalegalservices.com
TEXT ONLY: 502-230-1613
Voice: 606-219-6982
Disclaimer:
This information is for general educational and information purposes only and should not be taken as legal advice. I am not a lawyer. I can provide legal information but not advice. The difference is that legal information is equally applicable to everyone. Legal advice is tailored to your specific situation, and it is based upon a personal relationship of trust between you, as a client, and a lawyer. Your communication with a lawyer may be privileged and protected by law. Your communications with me are not. It is advisable to consult with a qualified attorney in your specific jurisdiction for guidance on your legal rights and obligations. The laws of every state are different. Consulting with experienced local counsel is essential. If you are involved in litigation, I urge you to seek legal counsel.
