Authorized User and Damaged Credit

Authorized User and Damaged Credit

What can I do if my credit is damaged due to me being an authorized user on a credit card that is past due?

My husband died March 2007. He had a credit card with Chase which I was an authorized user. The balance on the credit card was not from charges, but on of the offers of 3.90% for the life of the balance. I continued to pay on the account for 2 yearsafter he died. The minimum payments were 2% or around $300 a month. Chase sent a notice that the minimum payments would be 5% or around $700 a month. I contacted Chase and informed them my husband had died and I could not afford an increase like that. I was told I could change the terms but lose the 3.90% locked rate. I then asked how I was listed on the account and was told an authorized user. I asked if I was responsible for this debt and was told no. I stopped paying and now my excellent credit with no derogatory items shows this write off to Chase and me as an authorized user. This has really messed up credit that I worked very hard to achieve. Is there anything I can do?

Generally speaking, an authorized user is not legally liable for the charges on a credit card, as the authorized user never signed a credit contract with the credit card issuer. While a credit card company can, and in many cases must, report the activity on a credit card account on the credit reports of the primary cardholder and all authorized users, only the primary cardholder is legally liable for charges on the account. If, when the deceased cardholder applied for the card, you also signed the credit application, you may be a co-cardholder, and therefore may be liable for the debt. However, if the person who applied simply requested an additional card for you, and you did not sign an agreement with the card company, then you likely are not legally required to repay this obligation. In your case there is not much you can do because the account can be reported on the authorized users credit report.

Credit card companies and debt collectors frequently try to pressure authorized users to pay on accounts after the cardholder has passed away. Sometimes they even misrepresent the authorized user’s legal obligation to repay the debt, implying that the authorized user is legally liable for the debt. I strongly encourage you to consult with an attorney to determine your potential liability for this debt, as issues such as community property (if the late cardholder was your spouse) and whether or not you have used the card since the cardholder’s death may affect your liability. Frequently creditors try to mislead people, telling them that because they have made payments on the account, they are now liable for the debt; however, if you are not otherwise liable for the debt, simply making a payment on the account does not make you legally responsible for the debt.

If, after consulting with an attorney, you determine that you are not legally liable for this debt, you should consider notifying the creditor that you are not responsible for the debt and that you will not be paying it. In addition, you may want to send a cease communication demand letter to the creditor to stop any collection calls you have been receiving. You can find a sample cease communication demand letter here. Hopefully, taking these steps will stop any further collection activity on the account. If the creditor or its representatives continue to call you after you have notified it that you are not liable for the debt, you may be able to file a lawsuit against the creditor for violating your rights under state and federal collection law. Again, you should consult with an attorney about what steps to take if collection activity continues after you notify the creditor to cease its collection efforts.

I hope this information helps you Find, Save, and Learn.




KKen Reed, Jun, 2012
I realize this question may be old, but since it is a common topic hopefully the answer will help others. First of all, there are actually two distinct issues here. The first issue is credit reporting on the debt and the second is legal liability to pay the debt. I'll address them in order. Assuming that you are an authorized user and the bank has no recourse against you, you can simply dispute the tradeline as "Not Mine" and it will be removed from your credit file as the simple fact is that the account is not yours. Now for the tricky part. Contrary to popular belief, there are several conditions which could occur to make an otherwise authorized user legally liable for the debt should the original account holder default. You need to read the credit card agreement. Many companies, such as American Express, USAA & others, write their credit card agreements in such a way that authorized users are legally liable should the account holder default. Generally, however, the authorized users is only obligated to the extent that they have charged amounts to the card. For example, if you are an authorized user on an American Express card and the account holder runs up and defaults on a balance of, say, $10,000 and that amount includes $5,000 that you charged with your supplemental card, you are legally liable to the tune of $5,000 on the defaulted debt. Other common instances where the bank can have recourse against an authorized user include where the cardholder made charges that were for the benefit of the marital union or family. This may include, for example, medical expenses of a family member. For a bank to obtain recourse using this method, however, is not easy and it depends on the laws of your state of residence. Fortunately, it is not very common. Chances are that the original poster can just dispute the account as not hers and it will disappear from her credit reports.