An evaluation project started by the Federal Trade Commission nearly four years ago recently came to a conclusion.
The FTC recently announced that it has completed its review of the Holder Rule, which protects consumers who purchase goods and services using credit obtained through a merchant. This rule impacts “pretty much every aspect of your finance operation,” according to the legal team at Hudson Cook that compiled the eighth edition of CARLAW.
As part of its systematic review of all its rules and guides, the FTC recapped that back in November 2015, the agency sought public comment on the Holder Rule, including its efficiency, the costs and benefits of the rule and its impact.
Officials explained 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 regulator went on to note 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 said it received 19 comments, all of which urged retaining the rule. After reviewing the comments, the FTC found that there is a continuing need for the rule and the record did not warrant a rulemaking to modify the rule.
Officials 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 rule confirmation in the Federal Register.