Yes, as an account owner, you can sue an adult authorized user for damages they cause through their spending on your account. This action is typically taken when an authorized user incurs charges they refuse to pay or misuses the credit extended to them.
Understanding Authorized Users and Liability
An authorized user is someone given permission by the primary credit card account holder to use their credit card. While they can make purchases, they generally do not have legal responsibility to the credit card company for the debt incurred. The primary account holder remains solely responsible for all charges made on the account, regardless of who made them, in the eyes of the credit card issuer.
However, this lack of liability to the credit card company does not mean an authorized user is free from all financial obligations. If an authorized user agrees to pay for charges they make, or if their use of the card results in damages to the primary account holder (e.g., missed payments, damaged credit score), the primary account holder may have grounds to pursue legal action against them directly.
When Can You Sue an Authorized User?
Account owners have the right to take adult authorized users to court and sue for damages if the authorized user's actions lead to a financial loss for the primary account holder. This often happens in situations where:
- The authorized user made purchases with an understanding or agreement to reimburse the primary account holder, but failed to do so.
- The authorized user significantly overspent or misused the card beyond what was agreed upon, causing financial strain or damage to the primary account holder's credit.
- There was a clear agreement, even if informal, that the authorized user would be responsible for specific charges, and they breached that agreement.
Key Considerations Before Suing
Before initiating a lawsuit, it's crucial for the account owner to understand several factors:
- Adult Authorized User: The authorized user must be an adult for the primary account holder to have a clear legal standing to sue them directly.
- Proving Damages: You must be able to demonstrate the financial harm or "damages" you suffered due to the authorized user's actions. This includes documenting the charges they made and the negative impact (e.g., late fees, interest, credit score reduction).
- Last Resort: Suing should be considered a last resort. It's often advisable for account owners to inform authorized users that unless they furnish the funds, legal action will be pursued. This can sometimes prompt payment without needing to go to court.
Small Claims Court: A Common Venue
For disputes involving authorized users, small claims court is often the most appropriate and accessible venue. These courts handle cases where the amount of money in dispute falls below a certain limit, which varies by state. Typically, this limit can be around $5,000, though it can range significantly from state to state. Small claims courts are designed to be less formal, often allowing individuals to represent themselves without a lawyer, making the process more manageable and less costly than traditional civil litigation.
Steps Before Taking Legal Action
Before deciding to sue, consider these practical steps to resolve the issue:
- Communicate Directly: Have a clear, direct conversation with the authorized user about the outstanding balance and their responsibility.
- Provide Documentation: Share statements showing the charges attributed to them.
- Send a Demand Letter: A formal written demand letter outlining the amount owed, the reason for the debt, and a deadline for payment can be a powerful tool. It also serves as important documentation if you proceed to court.
- Remove Them as an Authorized User: If the financial issues persist, remove the individual as an authorized user from your account immediately to prevent further charges.
- Gather Evidence: Collect all relevant documentation, including credit card statements, any written agreements (even emails or texts), and records of communication.
Important Distinctions: Authorized User vs. Co-Signer/Joint Account Holder
It's vital to differentiate between an authorized user and someone who is a co-signer or a joint account holder, as their legal liabilities are very different, particularly concerning the credit card company.
| Feature | Authorized User | Co-Signer/Joint Account Holder |
|---|---|---|
| Liability to Lender | Generally not legally liable to the credit card issuer for the debt. | Fully and equally liable to the credit card issuer for all debt incurred. |
| Account Ownership | Does not own the account; merely has permission to use the credit line. | Co-owns the account; has equal rights and responsibilities for the account. |
| Credit Report Impact | The account may appear on their credit report, but payment history is tied to the primary holder. | The account and payment history appear on all parties' credit reports, affecting all equally. |
| Legal Action (from Primary) | Can be sued by the primary account holder for damages or breach of personal agreement. | Can be sued by the other co-signer/joint account holder for their share of the debt if one defaults and the other pays. |
Understanding these distinctions clarifies why suing an authorized user is typically a dispute between individuals (the primary account holder and the authorized user) rather than the credit card company pursuing the authorized user directly.
