Can you sue an authorized user?
You're liable for joint debt, but you can try civil court to collect
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 the hook.
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 with signatures.
- The date the loan was issued.
- The amount that you lent.
- How he would repay and by what date.
- 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 your case.
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.
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.
Published: March 7, 2012
- How debt management plans affect your credit – If severely in debt and behind on payments, your credit score is already hurting. Entering into a debt management plan can only help by showing timely payments ...
- Canceled cards boost debt utilization ratio – When you cut several cards from your wallet, you can reduce a big credit score hit by increasing the credit limits on your remaining cards ...
- When no credit history leads to card rejection – You need credit history to get a credit card, but issuers won't give you one unless you have credit. What's a college graduate student to do ...