[author: Barbara S. Mishkin]

On May 3, the Federal Trade Commission issued an advisory opinion interpretating its Holder Rule (officially titled the Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses). The Holder Rule provides protection for consumers who obtain credit from a seller or seller-arranged credit to finance the purchase of goods or services.

The rule allows the consumer to assert all claims and defenses against the holder of the credit contract that the consumer could assert against the seller. The FTC opinion concludes that a consumer’s right to an affirmative recovery under the Holder Rule isn’t limited to circumstances where the consumer can legally rescind the transaction or had purchased worthless goods. We have issued a legal alert on the opinion.

The Holder Rule was included in the CFPB’s list of rules that it will enforce. (See our prior legal alert discussing the CFPB’s list.) We expect the CFPB to follow the FTC’s expansive interpretation.