|
January 6, 2003, revised April 23,
2003
"In applying for a mortgage recently, I
found that the interest rate quoted was for someone with poor credit, which
surprised me. I have never missed a payment on a mortgage, credit card or other
debt in my life. My credit report, however, shows delinquencies on credit cards
that belong to my boyfriend, who has delinquencies and is in credit counseling.
I am an authorized user of these cards but I have never used any of them and I
am not legally responsible for them. Nonetheless, there they are on my credit
report, lowering my credit score. Why has this happened, and what can I
do?"
I was unable to answer this question, and
turned to Catherine Coy, a mortgage broker in Los Angeles who runs a Credit
Mastery Workshop for people with credit problems. The following is the exchange
between Catherine and me.
JG: Catherine, what is an "authorized
user"?
CC: Someone authorized by the original credit
card holder to use the holder�s card. The card-holder is responsible for the
charges of the authorized user, but the authorized user is not responsible for
paying any charges, including his own. An authorized user is different from a
co-applicant, who is responsible for paying all charges, including those made by
the principal card-holder.
JG: It sounds like something a trusting
parent might do with a child, although I never remember doing it with my kids. I
may have guaranteed their cards early on, but they had the primary
responsibility of paying the bills. I wanted them to learn how to manage their
finances. Why would any card-holder give someone a free ride?
CC: Some credit card holders want their child
or spouse, who don�t have an income of their own, to be able to use a credit
card without having to pay for their purchases. Credit card companies often make
it easy to do this by including a provision for an extra card on the application
form.
JG: If a bank or other credit grantor agrees
that the authorized user is not responsible for repayment of the debt, how did
it get on this person�s credit history as a delinquency?
CC: It got on there because the credit
grantor reported it to the credit reporting agency as a delinquency of the
authorized user. Why? Unable to collect from the responsible party, the original
card-holder, the credit grantor hopes that maybe the authorized user will pay to keep their credit record clean.
JG: That smacks of blackmail!
CC: It is, sort of, but it is understandable.
Credit grantors have been burned many times when authorized users have run up
credit card bills and the original card-holder has refused to pay. Despite the
fact that they are clearly responsible, card-holders make life difficult for
grantors when they say "Hey, I�m not paying, you don't see my
signature on all those credit slips, do you?"
JG: That doesn�t justify it.
CC: I agree.
JG: So what can she do?
CC: Assuming she is confident she signed
nothing herself, she should write to each credit grantor
and get a copy of the contract that her boyfriend signed. At the same time, she
should write to both the credit grantor and the
credit reporting agency, as follows:
"I'm an authorized user only and am not
financially responsible for this debt. By reporting me delinquent, you are
impugning my credit reputation in full violation of the Fair Credit Reporting
Act (FCRA). I am aware of my rights under the Act. I intend to enforce them if
you don't immediately remove all derogatory information from my credit profile
that you placed there as a result of non-payment by the financially responsible
party."
In addition, please provide me with
a copy of the agreement you claim I signed and upon which you are reporting delinquencies
in my name to the credit bureaus.
JG: She should write the credit grantor
twice?
CC: Yes. While this may seem like a
duplication of effort, she should be armed with all available information to
back her up if the bureaus prove to be obstinate, which they often are.
JG: And if this doesn�t work?
CC: She will have to play hardball and hire
an attorney to write an even more forceful letter. Both consumer reporting
agencies and credit grantors can be sued under the FCRA, and it might help if
more people did it. The attorney should specialize in FCRA matters. The National
Association of Consumer Advocates provides a list, see http://www.naca.net/db.php3
.
JG: As a postscript, the woman who wrote the
letter above wrote me later to relate how she had fared in following Catherine�s
advice. She said that two of the four credit grantors that had reported her
delinquent responded immediately and were cooperative. The other two gave her
the run-around. They finally came around, but only after she had spent an
inordinate amount of time on the telephone and had made a thorough nuisance of
herself.
Copyright Jack Guttentag 2003
| 
