Editorial Policy

What to do when an authorized user owes you money

Erica Sandberg

November 11, 2014

QHi Erica,

My sister has got me in a pickle. I put her on one of my cards as an authorized user, and she ran up $15,000 in debt within a year and a half. She basically put her groceries and household items on the card, then kept promising to pay me back, but didn't. She's off the card now, but I feel she needs to cough up for the amount she charged. Do I have any legal recourse? And if not, what do I do? Mitzi

ADear Mitzi,

I'm so sorry that your act of sisterly love turned out so poorly. However, while she may have been wrong to abuse her charging privileges, forcing her to pay up will likely be a challenge.Ask Erica

When you add people to your credit card as an authorized user, you are permitting them to use the account. The issuer sends them credit cards imprinted with their names, and they then have full legal access to the account. Yes, you can (and should) form an agreement with users about how they may use the card and for how much, but in the end, you are responsible for payments and debts.

The arrangement is similar to having a landlord. The landlord rented the home to you, and expects it to be maintained and paid for per the rental contract. If you were to invite a friend to stay, but she punched a hole in the wall, the landlord would not come after her for damages. He'd expect you to pay for it. Would you be able to ask this oddly destructive pal for the money? Absolutely! Getting it, though, is another story.

And that's where you stand with your sister. You invited her to be a guest on your credit card and she wrecked the account. I'm glad you gave her the boot, but you may be in for a fight if she chooses not to pay what she charged.

My immediate reaction in cases like these is to recommend small claims court (if all other means for resolution fail). It's a good way to settle such problems because it's a relatively simple process. The court fees are low, and you don't need to hire an attorney. In fact, you have to represent yourself, which really cuts down on legal costs.

However, because the amount your sister owes you is high, you would probably not recover all the cash due to you. How much you can sue for in small claims varies dramatically by state. Only a few allow for such substantial awards: You may sue for up to $15,000 in Delaware, Georgia and North Dakota, and a maximum of $25,000 in Tennessee. All other states have much lower limits.

This doesn't mean you can't use small claims, but if you did and won, you might have to accept less than the real sum she owes. For example, if you live in Kentucky or Rhode Island, the most you could get a judgment for would be $2,500, far short of the actual balance.

Now, you may not want to go the legal direction at all. Even if you do win the case, enforcing the judgment can be tough. Make sure you pursue other remedies first. Here are a few suggestions:

  1. Create an easy repayment contract. Sis may be avoiding you because she doesn't have all the money at once. Try establishing a payment plan that is within her means. Talk to her about what she can afford monthly. Even better, if she has a bank account, sit down with her (don't wait for her to do it as it might never happen) and arrange for a recurring payment to go directly into your account.
  2. Settle the balance. If you just want to get this whole affair behind you, consider accepting a lower sum as a settlement. If she can give you enough of what she owes to make you feel OK now, you can both move on and learn from the experience.
  3. Have her work it off. This is a tough one, but if your sister genuinely has no money and really wants to make good on the debt, hire her. If you have children, maybe she can babysit or house clean or help you paint some rooms … Come together and form a creative plan of action that you can both happily live with. Just be sure to keep a tally of the number of hours she worked and what each hour or task is worth.
  4. Ask for something she owns of value. Perhaps she owns a car that is valued at the amount she owes. Request that she sign it over to you. Harsh? Yes. Will she? I have no idea. But if her intentions are true, she ought to at least entertain this idea. Then you can sell the item and recoup.

The point is, work together to find a reasonable solution. If nothing works, your options are limited to taking her to court or forgiving the loan you never meant to give.

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