Small business debt
Key Learnings:
- Ensure you read carefully and know the terms and conditions of any financial agreement you sign.
Mr. A’s small business filed for bankruptcy in 2014 after several years of financial difficulties. At the time, there was a $15,000 balance on the company credit card. The balance went unpaid for some time and the bank, unable to collect from the company, turned to Mr. A to personally pay the outstanding amount.
Mr. A explained that he was not personally responsible for the liabilities incurred on his company credit card. He reasoned that the
credit card was opened for his small business, not for his personal expenses. All transactions were business related. He understood he completed the credit card application as a signing authority for the company, so the bank had no right to hold him personally responsible as he was simply acting as a company representative. The bank disagreed. It explained that Mr. A and his small business were jointly responsible for the credit card and any outstanding balance. The bank was aware that the small business had declared bankruptcy and, in accordance with the cardholder agreement, it sought payment from Mr. A. Unsatisfied with the bank's response, Mr. A came to OBSI.
During the investigation, we reviewed the cardholder agreement for this particular credit card as well as the online application Mr. A would have completed. We also confirmed that statements and disclosures were sent to him. We noted several instances that clearly described the agreement as between the bank and both the applicants. In this case, the agreement stated that Mr. A and his small business would be “jointly and severally” liable for all charges to the credit card. This meant that the bank would hold Mr. A’s small business, as well as Mr. A, personally responsible for the balance regardless of the reasons for the expenses.
We found the terms and conditions were clearly and properly presented during the credit card application process and we determined that Mr. A had had multiple opportunities to review the provisions in the cardholder agreement. We did not find evidence to support Mr. A’s position and, accordingly, did not recommend compensation.
Complaint not upheld
(2015)