Laws on Death & Credit Card Debt

A loved one's death can leave a family grieving and in shock--it can also result in frequent telephone calls from credit card companies requesting payment on the deceased's credit card debt. Depending on the type of account the deceased held, however, the credit card company may not have the right to demand payment from family members. Consumer protection laws exist to regulate creditors' rights to collect after an account holder dies.

Joint Account Holders

If the deceased shared an account with another person, that individual automatically inherits the responsibility of paying off the full balance of the credit card--regardless of whether he made the purchases. The credit card company may turn the credit card account over to a collection agency, file a lawsuit against the joint account holder or make negative reports to the credit bureaus should he fail to pay the deceased's credit card debt. Authorized users, however, are not joint account holders and are not legally liable for paying the credit card debt.

Collection Through Probate

If no joint account holder exists, credit card companies must file a claim against the deceased's estate. The executor of the will then pays off debts in a priority order. Typically, secured debts, such as vehicle loans and mortgages, are at the top of the priority list. If any assets are left over after the executor pays off secured creditors, those assets will be allocated to unsecured creditors such as credit card companies. In some cases, the deceased's estate runs out of assets before the credit card company receives payment. In this case, the credit card company has no choice but to charge off the debt and claim it as a tax loss.

Timely Settlement

In the past, when someone died, credit card companies could continue to add interest charges and fees to the account--inflating the amount that the deceased's estate must ultimately pay. The Credit Card Accountability, Responsibility and Disclosure Act (CARD Act) of 2009 put a stop to this practice by forcing credit card companies to stop adding additional charges to a deceased person's debt as soon as they receive formal notification of the event, typically through a death certificate and an official balance request from the will's executor. The credit card provider then has 30 days in which to provide the executor with the card balance.

Consumer Protection

Although the deceased's family members aren't liable for the debt, that doesn't stop credit card companies from trying to collect. A 2009 "New York Times" report states that some credit card companies train debt collectors in grief counseling to increase their odds of coercing family members into making a payment. The Fair Debt Collection Practices Act (FDCPA) contains a provision to protect consumers from debt-collector harassment--whether or not they owe the debts in question. Under the FDCPA, a person may notify the credit card company in writing that her relative is deceased and she no longer wishes to receive any contact from the creditor concerning the debt. The credit card company must comply with the person's demands or risk violating federal consumer protection laws.