Credit card issuers may want to review the way they handle consumer complaints over unauthorized charges before revisions to the legislation governing this area go into effect.

On Dec. 8, the Federal Reserve Board issued for public comment proposed changes to its staff commentary on Truth-in-Lending Regulation Z.

The commentary addresses, among other issues, a creditor's responsibility when investigating a cardholder's claim that someone used his or her card without permission.

Such revisions are routine and required by law. A spokeswoman for the regulatory agency said that the board selects various sections of the law based on feedback it gets from the industry.

Some consumer advocates speculated that the board focused on unauthorized credit card transactions in part because of charges that the Federal Trade Commission leveled against Dillard Department Stores Inc. of Little Rock.

Last September, the FTC alleged that the retailer violated federal law by making it unreasonably difficult for consumers to remove unauthorized charges from their Dillard's credit card bills.

The FTC cited several examples of "unreasonably difficult" demands, including requiring customers to file notarized affidavits and/or to testify in court against the purported unauthorized user to be absolved of the debt.

In this case, the FTC is seeking an order requiring Dillard's to give cardholders refunds or to credit their accounts, and to instruct credit bureaus to correct any derogatory information that Dillard's provided about these cardholders' accounts.

A spokeswoman for the FTC said that "the proposed commentary changes parallel the theory in our case against Dillard's."

The proposed amendments to the commentary, which are expected to be adopted in March with compliance optional until Oct. 1, 1995, were well received by consumer advocates.

The proposed changes are important, said Ken McEldowney, executive director of San Francisco-based Consumer Action, because "a cardholder can be put through all sorts of hoops, to make it difficult to assert his claim. (The proposal) shifts the burden a little to the card issuer."

The proposal contends that a card issuer has a responsibility to conduct a "reasonable investigation" when a customer disputes charges on his or her statement. But if the card issuer is not seeking money for the charges from the customer, no investigation is necessary.

Perhaps the most meaningful revision, according to Gerri Detweiler, a consumer advocate and the former executive director of Bankcard Holders of America, states that "a card issuer cannot automatically deny a claim based on a cardholder's failure, for instance, to submit a signed statement or notarized document, or to file a police report."

Mr. McEldowney added, "This whole section states that the presumption on the part of the card issuer should be that the cardholder is correct in his/her claim unless the card issuer can prove otherwise."

While the proposal does not specify how an investigation should be conducted, it does suggest what constitutes a "reasonable investigation," which could include: reviewing the types or amounts of purchases made in relation to the cardholder's previous purchasing pattern, reviewing where the purchases were delivered in relation to the cardholder's residence or place of business, and comparing any signature on credit slips for the purchases to the signature of the cardholder or an authorized user in the card issuer's records, including other credit slips.

Overall, consumer advocates were satisfied that the proposed commentary clarifies an area of the regulation that was fairly murky.

When the law is not specific, said Mr. McEldowney, "it provides too much room for different interpretations, and it is difficult for the consumer to say that (an investigation) was not done properly."

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