It’s one of the worst forms of financial betrayal: your parent, sibling or child uses your information to get credit and then fails to pay the bills. When the shock wears off, you may be stuck with a very ugly reality. Unless you are willing to turn in the perpetrator, the bills — and any resulting damage to your credit — becomes your responsibility to deal with, perhaps for years to come. A Credit.com reader has been grappling with just this problem:
My mother and I signed on a time share together back in 2004 and in 2006 she went back to the time share place and upgraded and signed a new loan without my knowledge or consent and now I see she isn’t making the payments and it’s on my report for a new loan that I had nothing to (do) with. Not sure what to do.
But It’s Not My Debt
Although your first inclination may be to let the lender know that you didn’t take out the debt or make the charges, it may not be that simple.
“If a customer knows that the perpetrator of the fraud is a family member then they have only one option not to be held liable for the charges. They have to file a police report and fraud affidavit listing the family member as the suspect,” says Brett Montgomery, Fraud Operations Manager for IDT911. Once you do, the lender may pursue your family member for payment. Or worse, criminal charges may be filed against them.
Is it possible to get out of paying the debt and repair your credit without getting your family member in trouble?
Not likely. Ultimately, this is a form of identity theft and to avoid getting stuck with the charges, the victim is required to take certain steps — including filing a police report.
“Without (a) police report, a company has no legal obligation to believe that fraud has taken place,” says Eva Velasquez, president and CEO of the Identity Theft Resource Center, which publishes a fact sheet on family identity theft. “The protections under the law, such as the Fair Credit Reporting Act, will not be triggered until a police report is filed. Organizations are under no obligation to investigate your claims or remove the offending charge unless you take the steps to demonstrate your innocence.”
And if you are considering filing a police report without divulging your family’ member’s involvement, keep in mind that you will file the report under penalty of perjury. They defrauded a lender; do you want to help them in their crime?
Velasquez says the victims she’s encountered have a variety of reactions when presented with this difficult dilemma. Some would rather struggle to pay the debt themselves, while others are happy to report the crook, related or not. “It really runs the gamut and it just depends on the relationship. Some of them will be so angry that they want to see the perpetrator punished,” she said in an interview. “Especially siblings who find siblings did this to a parent, or an ex-spouse.”
If other family members get involved, they will sometimes pressure the victim to maintain the family’s privacy. There may be “pressure from other family members (to) leave law enforcement out of it,” Velasquez says. “They feel very conflicted.”
For another one of our readers, turning in her mother wasn’t an option:
My mom was a store manager for Fashion Bug, and without my knowledge, signed me up for a store card with a $300 balance, and proceeded to max it out. When I found out about it through a collections call a year later, the total including interest and late fees was well over $700, and the representative said the only way to prove it was not my debt would be to file a police report against my mom (which is an absolute “NO!” as she is crazy, and would retaliate ten-fold). I made payments on it for as long as I could, but was never able to fully pay it off.
The Middle Ground
There is a possible middle ground here: Work out an arrangement with the person who took out the debt to pay it back. But unless they have good credit (and they probably don’t, since they used yours) it is unlikely they will be able to get a loan to pay you off right away. In the meantime you will have to make payments or otherwise resolve the debt, and just hope they make you whole.
“If the family member is not willing to pay, you can take them to small claims court and sue them for the money owed,” Velasquez says.
You don’t want to learn of a problem like this from a debt collector, so make sure you are monitoring your credit reports and scores to spot unusual activity. (You can check your credit scores for free once a month on Credit.com, and you can get your free annual credit reports through AnnualCreditReport.com.) If you notice inquiries from companies you didn’t apply for credit with, or accounts you don’t recognize, investigate immediately. Typically, the faster you catch fraud, the less time and money you’ll spend straightening it out. And if you discover you are a victim, consider placing a freeze on your credit reports.
More on Identity Theft:
- Identity Theft: What You Need to Know
- What Should I Do If I’m a Victim of Identity Theft?
- How Credit Impacts Your Day-to-Day Life