Originally Posted by
srodr
Can they actually do that?
Yes.
Financial responsibility law is to protect third-parties in case of an incident. It is not designed to protect your own. On the other hand, credit card benefit only protects your rental vehicle, not any damages you have caused to others. Many states do require drivers to meet financial responsibility law, in addition to the owner.
So having someone to pay for the damage is one thing. Meeting the financial responsibility law is another thing.