InfoBytes Blog
FTC says Holder Rule does not depend on transaction amount
On April 14, the FTC issued a note correcting prior staff guidelines on the FTC’s Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, commonly known as the Holder Rule. The Holder Rule “protects consumers who enter into credit contracts by preserving their right to assert claims and defenses against any holder of the contract,” including those later assigned to a third party. The note corrects the statement in a 1976 pamphlet by FTC staff that the Holder Rule “did not apply to transactions larger than $25,000.” Those staff guidelines stated that “the Rule incorporates the transaction cap that was present in the Truth in Lending Act (TILA).” However, the recent note points out that the language of the Rule includes no such incorporation nor does it contain any exemption based on transaction amount. Additionally, the note clarifies that the previous “erroneous guidance contradicts a statement by the Commission that the application of the Rule does not depend on the amount of the transaction.”