The Federal Trade Commission announced today that it has completed its review of the Holder Rule, which protects consumers who purchase goods and services using credit obtained through a merchant.
As part of its systematic review of all its rules and guides, the FTC in November 2015 sought public comment on the Holder Rule, including its efficiency, the costs and benefits of the Rule, and its impact.
The Rule, formally called the “Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses,” protects consumers when they purchase personal goods or services with money loaned by a merchant or by a lender who works with a merchant. The Rule requires that such loans include a provision that preserves consumers’ ability to raise the merchant’s misconduct as a reason for not repaying the loan, even if the loan is sold. The Rule prevents businesses from using financing mechanisms to collect debts from consumers in situations where the debt arises from a sale in which the merchant defrauded customers, failed to deliver the goods or services, or engaged in other misconduct.
The FTC received 19 comments, all of which urged retaining the Rule. After reviewing the comments, the Commission found that there is a continuing need for the Rule and the record did not warrant a rulemaking to modify the Rule. The Commission specifically restated a 2012 advisory opinion that affirmed that the remedies that the Rule provides are not limited to circumstances where the seller’s conduct warrants rescission of the contract, or where the goods or services sold to the consumer are worthless.
The Commission voted 5-0 to approve publication of the confirmation of the Rule in the Federal Register. It will be published in the Federal Register shortly.
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