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Former business partner misused card debt as an authorized user; what can I do?

First, remove him as an authorized user at once; then report the culprit to the police and seek legal help – what he did is considered a crime

Summary

When a business partner and authorized user goes rogue, you need to take immediate action to protect yourself and your business and avoid further damage; here’s what to do.

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Dear Your Business Credit,

My son opened his own construction business last summer. A “friend” was his employee and had his own business years before my son put him on the business account card as an authorized user.

Needless to say, he went crazy. He paid multiple personal bills, withdrew and transferred money at will. Son kept trying to work with him and believed all the stories. Now he’s lost his business and the friend/employee got him for nearly $35,000 before we persuaded our son he had to remove him … We had no idea how bad it was.

Now what? Can he pay personal bills and take money at will just because he was “authorized?” After my son changed his license to an inactive status, the “friend” continued to use the license number – illegally – and has been busted for that. He also collected cash payments from customers while still on the card and never deposited the money in the account. We just discovered this.

Can he do that, too, because he was authorized on the card?!! – Sherre

Dear Sherre,

It’s a good thing you stepped in. What a nightmare! I’m glad to hear that the “friend” was apprehended for illegally using your son’s license number.

If he hasn’t done so already, I’d advise your son to remove the “friend” as an authorized user. Just because he no longer works for your son, it doesn’t mean he’s incapable of misusing the card further.

Check out all the answers from our credit card experts.

Ask Elaine a question.

See related: How to remove an authorized user from a credit card account

How to handle authorized users gone rogue

When you have made someone the authorized user on a credit card, it is hard to make the case that they should not have used the card.

At the same time, when you issue a company credit card to someone, it doesn’t mean they can use the card for whatever they want or steal from the company, whether by running up personal charges on the card or by taking cash payments from customers and then pocketing them.

It seems like your son should report this to the police – ASAP. Cases where someone steals from their employer are often classified as embezzlement, but how it is handled will depend on the state and the details of the situation.

Seek legal help

I would highly recommend that your son hire a lawyer to help him pursue this case, due to the amount of money involved, the complexity and the potential harm it will do to his finances if he has to cover the $35,000 himself. If he has run out of money, he may be able to get a pro bono attorney through Legal Aid.

I found an interesting discussion of a similar situation on the legal site Avvo, which you may want to check out. The question pertains to an employee who ran up $10,000 in personal charges on a company credit card. The attorneys’ views on the situation varied slightly, but all agreed it was a crime.

Your letter is a good reminder of why small business owners need to be very careful about whom they issue company credit cards to. Not everyone can be trusted to handle a credit card responsibly. I hope this situation works out for the best for your son.

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Published: May 24, 2019

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