Editorial Policy

Authorized users not liable for deceased’s card debt

Erica Sandberg

April 5, 2016

Q Hi Erica,

If a deceased parent made her children authorized users on a card and a balance is unpaid and goes to a collection agency, does the collection agency have the ability to contact the credit bureaus to report the debt on the authorized users’ credit reports? — Walter

A Dear Walter,

“The ability” is an interesting way to put your question. Yes, the collection agency can attempt to get people who were legally allowed to use someone else’s credit card to pay, but they shouldn’t, and they can be stopped. Nor should the collector place information about the delinquent debt on the authorized users’ consumer credit reports, but they can try. Here’s why:

The owner of the account is (or in this case, was) the only person liable for the bills. That’s because the credit card issuer, after checking the person’s creditworthiness and income, granted the credit line to that applicant. The contract was between two parties: the issuer and the person who applied.

When the account owner asks the issuer to send designated people credit cards imprinted with their names, these authorized users can make purchases on that account. This doesn’t  change the terms of the contract. While a primary account owner may expect authorized users to reimburse the owner for charges they made, the card issuer can’t turn to the authorized users and request payment, even if the account goes delinquent.

While the card is active, the account activity typically shows up on all cardholders’ credit reports — owner and authorized users alike. That data is factored into the credit scores of all the cardholders.

When payments are received on time and the balance remains low, everyone’s credit rating benefits. But if a payment does not get made, the late payments will be listed on the account owner’s and authorized users’ credit reports. At any point, authorized users can contact the account owner or the card issuer and request to be removed from the account. After that, the account will no longer show up on the authorized user’s credit reports.

What if the card issuer sells the delinquent account to a collection agency? Certainly the collector may report that on the primary account owner’s credit file. They may also list it on the credit files of the authorized users. The credit reporting agency won’t check to make sure the debt is valid — that’s the responsibility of the consumer. Mistakes occur on credit reports, and I can see it happening with this type of issue. The collector sees that other people were associated with the account and automatically reports that to the collection bureaus.

Clearing up credit report errors is an easy problem to solve. Authorized users should log onto the website of one of the three major credit reporting agencies (TransUnion, Experian and Equifax) and fill out a dispute form. Authorized users should indicate they were not the account owner, and the delinquent account needs to be removed from their credit files. Filing a dispute form will lead to an investigation lasting about 30 days, after which the account should be purged from the authorized user’s credit report.

If the collector calls or writes to the authorized users to demand payment, the authorized users are protected under the Fair Debt Collection Practices Act. The outstanding balance on the card is not lawfully the responsibility of the authorized users. They are not required to pay the debt. If the collector persists, even after being told to stop the contact, authorized users can send a cease and desist letter. Upon receipt of the letter, the collector can either sue the deceased’s estate for the balance or drop the matter altogether.

SEE ALSO: 4 things authorized users should know

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