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Debtor-Creditor Law
Copyright 2017, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

1A-14 Debtor-Creditor Law 14.syn


Liability of Assignees and Related Creditors; The FTC Holder Rule


Editor-in-Chief, Theodore Eisenberg and Contributing Authors

Chapter Summary


In order to save time and expenses and prevent the necessity of a second lawsuit, it is often prudent for a consumer defending a collection action to raise claims and defenses against the seller or original creditor. But is the creditor who brought the collection action subject to those claims and defenses?

This chapter from Debtor-Creditor Law examines the Federal Trade Commission's Rule Concerning the Preservation of Consumers' Claims and Defenses ("FTC Holder Rule"), which requires credit-sellers to include in consumer credit contracts a notice that any assignees are subject to the consumer's claims and defenses against the assignor.

This chapter explains that the FTC Holder Rule prevents creditors from insulating themselves from assignor-related defenses by asserting their "holder in due course" status under the Uniform Commercial Code ("UCC") section 3-302. The FTC Holder Rule effectively defeats the assignee's status under the UCC as a holder in due course, and thereby subjects the assignee, as a matter of contract law, to the consumer's claims and defenses.

Furthermore, this chapter also discusses the effectiveness of the FTC Holder Rule as a consumer remedy in collection actions that do not involve credit sales, but, rather, notes originated by a third party lender that provides funds that are paid to the seller.

In addition, this chapter examines the following situations in which the FTC Holder Rule does not offer any consumer remedy: (1) when the collection action involves a loan that is not related to a sales transaction; and (2) when a bank is collecting on a bounced or dishonored check.

Debtor-Creditor Law (Matthew Bender) is a comprehensive multi-volume treatise, written by prominent experts in the field. It offers complete coverage of all aspects of the debtor-creditor relationship, including current case law, practical guidance, and numerous forms for the practitioner. In addition to comprehensive coverage of federal consumer credit legislation and the reprint of related statutes and regulations, Debtor-Creditor Law also features chapters covering Uniform Commercial Code Articles, including Article 2 (Sales), Article 3 (Negotiable Instruments) and Revised Article 9 (Secured Transactions). It covers third party obligations; satisfaction of obligations through non-judicial remedies; and international insolvency law and enforcement of judgments for a variety of countries, including Argentina, Brazil, Canada, Germany, and France.


Assignee,Assignor,Consumer,Debt Collection,Consumer Debt,Collection Action,Creditor,Consumer Remedies,Creditors' Rights,Credit Sales,Consumers' Claims and Defenses,Federal Trade Commission,FTC,Holder in Due Course,FTC Holder Rule,Uniform Commercial Code,UCC


See Chapter 1 for information on the Truth in Lending Act ("TILA"). See Chapter 3 for a discussion of the Consumer Leasing Act ("CLA"). See Chapter 4 for a discussion of various laws designed to prevent unfair or deceptive acts and practices, known as "UDAP" statutes. See Chapter 7 for information on consumer protection laws applicable to rent-to-own contracts. See Chapter 8 for information on the Fair Debt Collection Practices Act ("FDCPA").


See Lender Liability Law and Litigation (Matthew Bender) for expert guidance on the theory and practice of lender liability law.

See Anderson's Ohio Creditors' Rights (Matthew Bender) for step-by-step guidance on issues that a creditor may encounter in attempting to collect money from a debtor, along with examples, suggested forms and other practical materials.

See Commercial and Consumer Warranties--Drafting, Performing and Litigating (Matthew Bender) for in-depth analysis and practical discussions supported by extensive case authority from all jurisdictions.

See Collier Bankruptcy Manual (Matthew Bender) for definitive section-by-section analysis of the Bankruptcy Code, accompanied by detailed analysis of current rules, case law, and related non-bankruptcy law.
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