Descriptive Billing

What is Descriptive Billing

Descriptive Billing is a form of billing customers for credit card transactions that provides details of each transaction. Typically, a customer receiving descriptive billing will receive information on the date of the transaction, merchant information, a description of the goods or services rendered and other details.

BREAKING DOWN Descriptive Billing

Descriptive billing was developed to replace country club billing in the 1970s, which had begun to decline in popularity both for consumers and credit card companies. Country club billing required the credit card company to send the actual credit card slips for each transaction to the customer, making the accounting process for reconciling statements more expensive and labor-intensive for all parties.

Of course, some customers and advocates resisted the shift to descriptive billing, favoring the sense of security and detailed transaction information provided by a paper trail, country club billing remained most secure only for in-person transactions. Credit transactions initiated over the phone or online, which have come to define many consumers' retail habits, sidestep any benefits of paper billing.

As descriptive billing became the standard for credit card billing, regulations began to be implemented and refined to govern the ways cardholders would be billed. In particular, Regulation Z, implemented in the Truth in Lending Act of 1968, requires that if a credit card company does not include transaction slips in their billing, as in country club billing, the creditor is required to supply the cardholder detailed transaction information, including the date of the transaction, identifying information on the merchant which ran the transaction, and details on the goods or services transacted.

Descriptive Billing and the Truth In Lending Act

The Truth In Lending Act (TILA) was passed into federal law by the U.S. Congress in 1968 and was enacted to protect consumers in their business with creditors and lenders. TILA was subsequently implemented by the Federal Reserve Board via a series of regulations.

Regulation Z sets forth rules against misleading practices by creditors and lenders, requiring all lending industry parties to disclose terms to their customers in writing and to provide detailed information on all transactions so that customers are not misled about crucial billing details such as interest rates, finance fees, and unauthorized charges. Rules for descriptive billing practices are specifically addressed under Regulation Z. 

While federal law governs the implementations and interpretations of TILA and its associated regulations, some states and industries have implemented stronger requirements and regulations regarding information disclosure and transaction reporting, providing both creditors and consumers with greater protections against inaccurate, unfair, or fraudulent practices.