A consumer recently wrote me about a problem with her Sears/Citibank account. Her story has an important warning I want to share with everyone.

This woman I&39;ll call "Shelly" had a payment due on her account March 14, 2006, but she didn&39;t receive a billing statement for it. She realized on  March 17, 2006 that it hadn&39;t arrived so she called the card issuer immediately, and paid it by phone. She told me she did not receive a statement for that month because it was sent it to a wrong address, though the issuer had been sending it to the correct address for over a year, and she did not change her address.

The next month her interest rate rose from 5.9% (with a payment of  $135.00 a month) to 32% interest (with a payment of over $300). She couldn&39;t afford the higher payment and tried to negotiate it down. She continued to pay $135/month which resulted in fees and penalties. Her balance is now over $11,000. (It was $9000 when the mess started.)

I contacted the card issuer on Shelly&39;s behalf, and they are looking into her problem.

I am also sending Shelly a copy of Managing Debt for Dummies, a new book that just came out in the Dummies series. Written by long-time consumer advocates and attorney John Ventura and Mary Reed, it offers straightforward smart advice for digging out of that hole and getting ahead. Like Ventura and Reed&39;s other books it gives the straight scoop on your options and how to make sense of them.

But back to the story...

If Shelly is correct in her assertion that the bill was mailed to the wrong address, and she made good on the payment immediately when she noticed it, a 32% rate hike seems unnecessarily harsh. I don&39;t think an issuer should more than quadruple the interest rate because of a mistake that appears, at least in good part, to be their fault. (Actually I think there are few reasons for a 32% rate!)

The good news is there is a federal law that comes into play here. Under the Fair Credit Billing Act, if an issuer doesn&39;t send your billing statement (provided you gave adequate notice of a change in address) then you can dispute the matter under that law. If you write to the issuer within 60 days of the date the statement should have been mailed to you, then the issuer can&39;t charge interest as a result of the error.

However, Shelly did what most of us would do -- she called the issuer. But phoning does not preserve your rights under the Fair Credit Billing Act. Only a letter sent to the billing errors address on her statement would have sufficed.

Shelly tells me she did write, but after that all-important 60-day window closed. Had she written the issuer promptly, she would definitely have a been protected against extra interest charges.

Hopefully Citibank will do the right thing and work out the problem with Shelly. I&39;ll let you know what I hear from them.

In the meantime, keep in mind that if you have any kind of billing dispute with your credit card, always follow up right away in writing, send the dispute certified mail, and keep a copy of your correspondence for your records.