Parties Liable for Credit Card Debts

The Richmond Circuit Court, in the case of Chevy Chase Savings Bank v. Strong, ruled that a husband who was only an “authorized user” on a bank credit card issued to his wife was not liable to the bank for a $5,024 cash advance check he wrote on the credit card; only the wife was liable.

In Virginia Code §11-31, Virginia has codified the rule that use by an authorized agent of a cardholder shall be the equivalent of use by the cardholder.  That rule, however, does not address the question of the liability of the agent.  The court reasoned that while it does not appear that any Virginia Court has addressed the issue, the language used in the statute and case law from other jurisdictions led the Court to believe that the issue was governed by agency law.

The Court stated that it was well established in Virginia that when an agent contracts for a disclosed principal, credit is extended to the principal, and the benefits of the contract are accepted by the principal, there is no personal liability on the agent.  In this case, the bank was well aware that the principal was the wife.  It extended credit to her based on her application for a card.  They were aware that no contract was ever made with husband individually and, therefore, they knew that he was simply an authorized agent.

The Court found that there was no indication in this case that husband exceeded his authority in executing the check against the account, or that he agreed to be personally liable for any debt incurred on his wife’s account.  Accordingly, the court ruled that the liability for the debts belonged only to wife.  The court ruled that the husband was not liable for any portion of the outstanding balance, including the amount of the check that he personally wrote.

The lesson from Strong - do not confuse guarantors with authorized users.