AFSA Comments on "Holder Rule"

On Feb. 12, the American Financial Services Association (AFSA) submitted a comment letter to the Federal Trade Commission (Commission) regarding the trade regulations rule concerning the preservation of consumers’ claims and defenses, commonly known as the “Holder Rule.” As the Commission wrote in the Federal Register notice asking for comment, “The Holder Rule protects consumers who enter into credit contracts with a seller of goods or services by preserving their right to assert claims and defenses against any holder of the contract, even if the original seller subsequently assigns the contract to a third-party creditor or assignee. It requires sellers that arrange for or offer credit to finance consumers' purchases to include … a [specific] Notice in their contracts.”

AFSA’s letter expressed concerned about recent attempts to expand assignee liability well beyond the limits of any fair reading of the Holder Rule’s plain language. The letter stated, “In AFSA’s view, the Commission should not amend or alter the text of the Holder Rule, but should clarify and confirm its position in … four respects.”

The four ways AFSA suggested that the Commission clarify and confirm its position are that: (1) the Holder Rule should not be expanded to apply to vehicle leases; (2) the Holder rule should not apply to consumer credit contracts for the sale of consumer goods or services that are exempt from the Truth in Lending Act and Regulation Z; (3) the Holder Rule does not apply to rescinded, re-financed, or paid-in-full consumer credit contracts; and (4) that any court-awarded sum, under the Holder Rule, must be limited to amounts paid by the debtor.