Mom piggybacked on realty agent's troubled account. What now?
To Her Credit
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com
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Dear To Her Credit,
My mother is 78 years old and lives in Illinois. About seven
years ago, she wanted to buy a condo, but she had absolutely no credit history.
She had never possessed a credit card in her entire life. A real estate agent
who had shown her a property proposed putting my mother on one of her credit
cards to allow her to build her credit history. I thought this was extremely
suspicious when she told me about it, but it had already been done. I don't
know if she was an authorized user or a joint account holder.
For the last two years, my mother has been aggressively
pursued by a collection agency for a $1,400 debt. She is in a complete panic. She
never once used the card. It turns out the real estate agent declared
bankruptcy a few years ago and claims to have no credit cards, but still owns a
condo. The address on the debt claims are the address of the real estate agent,
but with my mother's name. The correspondence is sent to my mother's actual
My mother is in poor health and I'm afraid all
this stress might be the end of her, especially if she has to go to court. Is
my mother responsible for this unscrupulous agent's debt? What recourse does
she have? I would be sincerely grateful for your assistance. -- Gabriella
Your mother had the best of intentions in letting herself be
added to the agent's credit card. Adding someone to an existing credit card
account to gain the advantages of the credit history of a longstanding account
is called "piggybacking." Parents sometimes do this to help a young
adult child get started, for example. It's a perfectly legal,
but backdoor method to get credit history. Steven J.J.
Weisman, a Boston lawyer who specializes in probate and elder care matters, says, "She should have been aware that she was not accurately
reflecting her own credit history by being added to the account."
With a real estate agent urging her on, and giving
assurances it was the thing to do, however, she went ahead. If she was just an
authorized user, she would not be responsible for the account. The fact that
she is being aggressively pursued by the creditor leads me to believe she
signed -- perhaps unknowingly -- as a joint account holder.
The idea of a real estate agent adding a client to the
agent's credit card account is outrageous. "No licensed real estate agent
should ever add someone to his or her credit card for purposes of creating a
credit history," says Weisman. "There should be liability on the part
of the real estate agency for which she worked so that the woman should not
lose any money. The agency should be contacted by a lawyer on her behalf."
Weisman says that one reason your mother should have a
lawyer represent her is that, under federal law, anyone collecting on the debt
would not be able to contact her directly. They would have to contact her
attorney. This is important both to protect her case, and to shield her from
more unnecessary stress and fear.
In normal circumstances, when people are joint account
holders and one account holder skips out or files for bankruptcy, the other
account holder has to pay the balance. This situation is different, Weisman
says. " The combination of facts of an inexperienced elderly woman who did
not run up the charges on the card, coupled with an improper action by the real
estate agent, should be enough to protect her from liability. The most
promising way to deal with this would be with the real estate agency for which
the agent worked."
See related: Ex-wife racks up debt on joint accounts, If authorized user goes bankrupt, account holder's credit not at risk, There ain't no cure for the bad co-signer credit score blues
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Published: May 30, 2014