Others not liable for card owner’s debt

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Dear Debt Adviser,
A relative who had me on his credit card accounts as an authorized user has died broke. The credit card companies are calling me to make payment arrangements. I understand that authorized users are not responsible for the account. Is this correct and where can I cite this?
— Angela

Dear Angela,
I have never been fond of adding authorized users to an account to build another person’s credit. Here’s some background on authorized users for those readers not familiar with the practice. Authorized users piggyback on the credit of a friend or relative. The credit history of the account owner gets reported on the credit report of the authorized user and helps build good credit. Sounds good, so far.

But wait, there’s more. Things can go bad when the account owner has a problem that results in a negative credit item being reported. Depending on a creditor’s policy, the authorized user may get the negative item, too. Usually authorized users have no idea what’s going on and, while they aren’t responsible for the debt and can’t even take their name off the account on their own, they could get hit with the negative trade line on their own credit report and a get lower credit score.

In your case, I’m sorry to say, it may be worse. Here’s why. Legally the account is no longer a valid asset. So the lender may write or charge it off. This could mean an R9, or “charge-off” status, which is a negative on your credit report. What you may not know is that the charged off account could be sold, along with other charged off accounts, to a collection bureau at a huge discount and you may hear from it in the future.

Yes, you are absolutely correct that authorized users of credit card accounts are not financially responsible for payment of the accounts. But that won’t stop some collectors from asking you to pay. Some reasons they may give is to keep the memory of the person clear or that he would have wanted it that way. The next time you get a call, explain to them that you know your rights and that you are not legally responsible.

Ask them to send you a copy of the original agreement for the credit card account. They just might respond with, “We can’t send information regarding this account to you because you are not the owner of the account.” This would allow you to respond, “I rest my case.” Keep all your documentation with the lender in case you need it for a collector down the road.

Most credit card agreements include a provision that the cardholder is wholly responsible for any authorized use by a secondary cardholder or authorized user. The cardholder agreement is a contract between the card issuer and the person who owns the account. Those persons added to the account as authorized users do not in any way enter into an agreement with the card issuer and are therefore not responsible for any charges associated with the account.

In the case of a death of the primary cardholder, some authorized users get into trouble by charging on the account after that person’s death. If the card issuer can prove that the charges were knowingly and fraudulently made after the death of the cardholder, the authorized user could be held responsible for any charges made after that date.

You might want to contact the credit bureaus and dispute the account. They should take it off your report. I suggest you do this soon because, should the creditor report the account holder as deceased, it may show on your report and a credit report with any deceased notation on it is not eligible to receive a credit score.

I’m sorry for your loss and hope your conversations with the credit card companies go well.

Good luck!