Corporate Credit Cards--Who pays if your employer goes under?

[Dee Thom]

Watched G.M.America yesterday, it was Labour Day holiday here, and one of the topics was "What happens if your employer goes R over Z leaving company debts including credit cards, unpaid.
It has happened here to a few employees with corporate cards, and if they have signed for car rentals, accomodation, flying and travel, they are liable for these debts. One bloke was up for $US35,000 in unpaid card debts, and was unable to pay, and as a result was left with no credit rating, and unable to re-mortgage his home, or borrow money for other purposes. :shock:
Could this scenario take place here in Australia ?

Cheers Dee

 

[Fantic125]

Possibly yes.
From the limited business experience I have, if the liability for payment of the card is with you as a person then you would be responsible for payment as it falls due.
If the company went into administration then you would be able to claim as an unsecured creditor to recover the money, but it would take some time and there would be no guarantee that you would be paid the full amount.

 

[Ewing]

I was issued a corporate AMEX charge card by my employer a few years back. In the fine print on the form it stated that if the employer doesn't pay the bill then I'd be liable.

They even did a credit check on me which I was not happy about (I found out earlier this year when I retrieved my credit report to see what's on there):

We're not using AMEX anymore. The NAB Visa charge cards we have now didn't have anything along those lines in the T&C on the form - it was basically just an ID check.

In any case, the risk is still less than putting expenses on your personal card and claiming them back.

-Shaun

 

[Dee Thom]

I was issued a corporate AMEX charge card by my employer a few years back. In the fine print on the form it stated that if the employer doesn't pay the bill then I'd be liable.

Yes, I think the guy who got lumbered said it was a Diners or Amex card, it should be a worry for people with a corporate card.

Cheers Dee

 

[markis10]

Amex has a couple of different schemes for corporate credit cards, company liability, shared liability and personal liability. When it comes to company directors it gets more interesting:

Allens Arthur Robinson: Publication: 2002 Insolvency Annual Review - Directors & corporate governance

 

[drewbles]

Way back in a former life when I worked for a large US telco (in their Sydney office), I had a corporate AmEx.

I too was subjected to a credit check which I was not happy about either. During the process, I actually asked this exact question out of interest. I was advised of three ways companies can setup corporate card accounts.

1) Company Liability. The company bears all responsibility for any transactions.
2) Joint Liability. The company and the card holder share responsibility for any charges (although I have no idea how this would be enforced if the company went titsup or if the employer and employee had a messy parting of ways)
3) Individual Liability. This is what most companies (obviously) will go for. The person racking up the bills is liable.

At the company I was at, they had option 3. I was allowed to collect MR points, providing I paid the membership fee. The account would be sent to me, I would forward it to accounts with copies of receipts, and they would pay the bill. It was simple, but I only ever put my mobile phone on the card (it was a requirement that all people in my department had a corporate amex, even though we never travelled. Large companies and their policies!).

I would tend to believe that companies would want option 3 to cover their own bums, and the GFC probably emphasised that.

 

[Bundy Bear]

The Amex that we had in the past; the person whos name was on the card was responsible for the charges, although the money came out of the company bank account.

With a corporate Visa or mastercard then the company is liable for the charges. The current arrangement we have with the bank is the overdraft + loan + credit cards up to a certain amount + wages for a week.

If your company goes broke when you are traveling with a visa/mastercard then you won't have to pay for any past charges but if you use the credit card to get home then the credit card will likely be declined and you will need to pay yourself to get home.

So its always good to travel with a spare credit card or cash in case anything goes wrong.

 

[markis10]

My company Amex was full company liability, then again we were making gross profits of $600M USD a quarter with a margin of 95% on real products and had real assets, so there was little chance of the company going bust!

 

[MDC]

I was stuck with a fairly decent amount after my US based employer refused to pay out my expenses after closing the AU regional office..... Nothing could be done as I was employed by the regional office which was treated as a small business according to the industrial relations laws at the time.

 

[BVT]

On a similar note, some time ago all senior managers of the firm were given a telco charge card for business and personal use. The telco went belly up leaving debts galore. We had paid our bill, but thay had not paid.

The first that I and my colleagues knew of it was when we all got served with Writs; in my case, claiming $35,000! Served at home on a Sunday morning too!

In the result all was sorted, but it took about 18 months t get our names of the list of bad debtors.