The Federal Trade Commission (FTC) just published a request for public comments on the economic impact of and continuing need for the Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, commonly known as the “Holder Rule.” In addition, the FTC has requested public comments on any developments in case law that should be reflected in the Holder Rule, and the effect on the Holder Rule of any recent regulatory, technological, economic, or other industry changes. This request for public comments is part of the FTC’s periodic review of its rules and any information submitted in response to the request will assist the FTC in identifying whether changes to the Holder Rule are warranted. Written comments must be received by the FTC on or before February 12, 2016.
The Holder Rule protects consumers who enter into credit contracts with a seller of goods or services by preserving their right to assert claims and defenses against any holder of the contract, even if the original seller subsequently assigns the contract to a third-party creditor or assignee. Among other requirements, the Holder Rule requires consumer credit contracts to include a disclosure that any holder of the contract is subject to all claims and defenses that the debtor could assert against the seller of the goods or services obtained under the contract. Therefore, any third-party creditor or assignee of a consumer credit contract may be subject to any claims or defenses that the consumer could have asserted against the seller.
The FTC is soliciting comment on the following specific questions, among others, related to the Holder Rule:
- Is there a continuing need for the Holder Rule as currently promulgated?
- What benefits has the Holder Rule provided to consumers?
- What modifications, if any, should the FTC make to the Holder Rule to increase its benefits to consumers?
- What impact has the Holder Rule had on the flow of truthful or deceptive information to consumers?
- What significant costs, if any, has the Holder Rule imposed on consumers?
- What modifications, if any, should be made to the Holder Rule to reduce any costs imposed on consumers?
- What benefits, if any, has the Holder Rule provided to businesses?
- What modifications, if any, should be made to the Holder Rule to increase the benefits to businesses?
- What significant costs, if any, including costs of compliance, has the Holder Rule imposed on businesses?
- What modifications, if any, should be made to the Holder Rule to reduce the costs imposed on businesses?
- What evidence is available concerning the degree of industry compliance with the Holder Rule?
- Are any of the Holder Rule’s requirements no longer needed?
- What modifications, if any, should be made to the Holder Rule to account for changes in relevant technology or economic conditions?
- Does the Holder Rule overlap or conflict with other federal, state, or local laws or regulations?