Since the early 1990s, the Federal Trade Commission (FTC) has conducted periodic reviews of its numerous trade regulation rules and industry guides in order to, in its words, “ensure that they enhance consumer welfare without imposing undue burdens on business.”

The FTC published a Federal Register notice on December 1, 2015, that it is reviewing its Trade Regulation Rule concerning the Preservation of Consumers’ Claims and Defenses (commonly referred to as the Holder Rule). As part of the process, the FTC is soliciting public input on the efficacy, economic impact, and other aspects of the Rule.

Adopted in 1975, the Holder Rule is designed to preserve the right of a consumer to assert against a subsequent holder of a credit sales contract those claims and defenses related to the transaction that the consumer had against the original seller.

The Federal Register notice requests comments on a number of specific questions concerning the continuing need for the Holder Rule, the financial burden of compliance on affected businesses and whether that burden is justified by the benefit to consumers. Examples of conflicts between the Rule and other federal or state laws or regulations are also sought, as well as recommendations addressing the effect of technological or other relevant changes since the Rule was adopted. The notice also solicits specific proposed modifications to the Rule aimed at increasing its benefits, reducing its costs, or both, with any supporting evidence.        

The FTC encourages input from all interested persons, including consumers, businesses, advocates and industry experts. Comments, which are due by February 12, 2016, may be submitted through the federal rulemaking portal, by mail or by hand delivery to the FTC’s designated contact.                

As discussed in an earlier alert, the Holder Rule is one of a number of the FTC’s Trade Practice Rules that the Consumer Financial Protection Bureau (CFPB) intends to enforce against entities subject to its jurisdiction. As such, despite the lack of direct FTC jurisdiction over depository institutions, banks subject to CFPB enforcement authority may wish to consider submitting comments.

The firm’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

If you have questions, please contact Consumer Financial Services Group Practice Leader Alan S. Kaplinsky, the authors of this alert, or the Ballard Spahr attorney with whom you work. 


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