Authorized users of credit cards are different from joint credit card owners. Authorized users do not sign anything, and, therefore, are not legally responsible for the charges made to a credit card, even if they made the charges. It's important to know the responsibilities and liabilities of such an arrangement. Maryland's laws regarding authorized users do not differ from federal law, although Maryland laws do differ in other credit matters such as bankruptcy. Contact an attorney in your area for legal advice.
What Is an Authorized User?
An authorized user is someone authorized by the cardholder to use a particular credit card. The cardholder must add that person to the account for him to become an authorized user and must remove the authorized user to prevent him from using the card. Because an authorized user does not sign the application or any other document, he is not responsible for paying any charges on the card, but he is authorized by the cardholder to use it in Maryland or any other state. Often a parent may add her child or a spouse may add the other spouse to her account as an authorized user. Some credit cards have more options for adding authorized users than others, and may even allow a spending limit to be applied to the authorized user. There can be other benefits to such an arrangement, but there are also risks.
Benefits and Risks
Credit card companies report to the credit bureaus on activity of both cardholders and authorized users, and this is true in Maryland as well. This means that if a credit card is paid in a responsible and timely manner, the authorized user's credit history reflects that, even if he makes none of the payments. This helps the authorized user's credit score and can be a way for young people to establish credit, or for those with poor credit to re-establish their credit. However, it can also be a risk. If the card is not used responsibly by the authorized user or the cardholder, the authorized user's credit report and credit score can suffer, even though he is not legally liable for the debt.
Paying Attention
Often, if a cardholder defaults on a credit card, an authorized user will find this listed on his credit report, even though he is not legally responsible for the debt. Contacting both the credit card company and the credit bureau to ask that they remove the incorrect information may be necessary. It may require persistence or the hiring an attorney, but under the federal Fair Credit Reporting Act, which applies to Maryland credit reporting, both the reporting agency and the credit card company are required to remove the incorrect information.
Authorized User Liabilities
If a creditor cannot collect a debt from a cardholder, it may attempt to sue the authorized user of the card. If such a lawsuit is ignored, it can result in a default judgment. This leaves the authorized user responsible for the debt, even though it was not originally his.
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