Can you sue an authorized user?
You're liable for joint debt, but you can try civil court to collect
Erica Sandberg is a prominent personal finance authority and author of "Expecting Money: The Essential Financial Plan for New and Growing Families." She writes "Opening Credits," a weekly reader Q&A column about issues for people who are new to credit, for CreditCards.com.
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Dear Opening Credits,
Do I have a chance of winning
a case in court if I have a written agreement with the authorized user who
borrowed from my credit card? This guy won't answer my calls. He always hangs
up on me. What can I do to make him pay? -- Lissette
You were generous enough
to let a pal become an authorized user on your credit card account, and then he
repaid your kindness by charging it up and running off? He's no real friend,
that's for sure.
The question is, what can
you do about it now? With a co-signer, both of you are equally responsible for
the debt incurred on the card, but since he was an authorized user, the guy was
just a guest on the account. From the credit issuer's perspective, he is off
However, this doesn't
mean that he isn't liable for the charges. You were wise to draw up an
agreement. I assume that it contained all the essential elements, including:
- Your full printed names
- The date the loan was
- The amount that you lent.
- How he would repay and by
- Any interest or other
fees you might add to the bill.
- Repercussions, such as
taking a specific piece of property, if he did not follow through.
By creating such a
document, you formed a legal contract, and one that might very well stand up in
a court of law. I can't say if you'll walk away the victor, but it sure helps
If your former friend
continues to dodge his duty, you very well may want to file a lawsuit against
him. You have two court options. The first and most common for people in your
situation is small claims. You don't say how much he owes you, but the amount
you can sue for in this type of court depends on the state you live in. For example,
in Arizona, the maximum sum is $2,500, but in Tennessee it's $25,000.
Watch a few episodes of
Judge Judy to get a feel for how small-claims court operates. Minus the cameras
and commercials, it's a fairly accurate portrayal of what happens: you are the
plaintiff and the person you sue is the defendant. Each of you represents
yourself, since no lawyers are allowed to argue on your behalf. In turn, both
of you present your side of the story. After hearing your testimonies, the
judge rules (there is no jury) in favor of one of you.
If you win, the court may
force the debt-ditcher's hand by ordering a wage garnishment or some other
collection method so you can get your money. Not all states allow for this, though.
At the very least, the judgment will be noted in the public records section of
his consumer credit report.
You also may use
municipal court, where you can have legal representation and sue for a greater
amount of money. The problem with this, though, is that lawyers can be quite
expensive, so if you lose the case, you'll be saddled with that bill as well.
The best case scenario is
that this person changes course and pays what he owes. Maybe the threat of a
lawsuit will be enough to inspire him to make good on the debt. In the
meantime, contact your credit card company and have this rotten guest removed from your account. That's your right and you need to exercise it immediately.
See related: Yes, card issuers can sue you for nonpayment, What authorized users can and can't do with your credit card
Erica Sandberg is a nationally renowned personal finance authority. She’s host of several financial web shows, and a frequent guest for media outlets such as Fox, Forbes, Nightly Business Report and NPR. Erica previously was affiliated with Consumer Credit Counseling Service and was KRON-TV’s on-air credit expert. Her book, "Expecting Money: The Essential Financial Plan for New and Growing Families," was published in 2008 by Kaplan Press.
Send your question to Erica.
Published: March 7, 2012