Welcome to Scribd. Sign in or start your free trial to enjoy unlimited e-books, audiobooks & documents.Find out more
Download
Standard view
Full view
of .
Look up keyword
Like this
11Activity
0 of .
Results for:
No results containing your search query
P. 1
"The FTC 'Holder in Due Course' Language: What's your Liability?"

"The FTC 'Holder in Due Course' Language: What's your Liability?"

Ratings:

5.0

(1)
|Views: 2,918|Likes:
Published by Arnstein & Lehr LLP
Arnstein and Lehr attorney's John Ropiequet, Eugene Kelley, Christopher Naveja and George Apostolides discuss liability issues with Auto Finance and Leasing.
Arnstein and Lehr attorney's John Ropiequet, Eugene Kelley, Christopher Naveja and George Apostolides discuss liability issues with Auto Finance and Leasing.

More info:

Published by: Arnstein & Lehr LLP on Apr 18, 2009
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less

05/11/2014

pdf

text

original

 
T
HE
FTCH
OLDER IN
D
UE
C
OURSE
L
ANGUAGE
:W
HAT
S
 Y
OUR
L
IABILITY
?
 
Eugene J. Kelley, Jr.John L. RopiequetChristopher S. NavejaGeorge P. ApostolidesArnstein & Lehr 120 S. Riverside PlazaChicago, Il 60606
 
2
THE FTC “HOLDER IN DUE COURSE” LANGUAGE:WHAT’S YOUR LIABILITY?Background
In many transactions, a retailer sells an automobile or other “big ticket” item to aconsumer, enters into a retail installment contract with the consumer, and then assignsthe contract to a finance company.The simple assigning of the contract has legal significance. It may protect afinance company from many claims. As an assignee of the contract, a finance companyis not equivalent to the original creditor under the Truth in Lending Act (“TILA”).Under TILA, an assignee is liable “only if the violation [of TILA] . . . is apparent onthe face of the disclosure statement.” 15 U.S.C. §1641(a). “In general, courtsaddressing the issue of TILA assignee liability have found that §1641(a) limits liabilitywhen there is no indication from the disclosure document that liability may arise.”Alexander v. Continental Motor Werks, Inc., 1996 U.S. Dist. Lexis 1849 at *16 (N.D. Ill.1996).The plaintiff’s bar frequently attempts to circumvent this TILA limitation, by relyingon language in the contract required by the Federal Trade Commission (16 C.F.R.§433.2), which is sometimes called the “Holder in Due Course Rule.” The FederalTrade Commission requires certain language on all retail installment contracts. Therequirement and the language provide, in part:§433.2 Preservation of consumer’s claims and defenses,unfair or deceptive acts or practices.
 
3In connection with any sale or lease of goods or services toconsumers, in or affecting commerce as “commerce” isdefined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of Section 5of that Act for a seller, directly or indirectly, to:(A)Take or receive a consumer credit contract which failsto contain the following provision in at least ten point, boldface type:NOTICEANY HOLDER OF THIS CONSUMER CREDIT CONTRACTIS SUBJECT TO ALL CLAIMS AND DEFENSES WHICHTHE DEBTOR COULD ASSERT AGAINST THE SELLEROF GOODS OR SERVICES OBTAINED PURSUANTHERETO OR WITH THE PROCEEDS HEREOF.RECOVERY HEREUNDER BY THE DEBTOR SHALL NOTEXCEED AMOUNTS PAID BY THE DEBTORHEREUNDER.16 C.F.R. §433.2. (40 Fed. Reg. 53506, Nov. 18, 1975; 40 Fed. Reg. 58131, Dec. 15,1975). The plaintiff’s bar claims that this language overrules the limitation on assigneeliability in Section 1641(a). The issue is currently being debated in Smith v. GuardianNational (97-1208) and Taylor v. Quality Hyundai and Bank One (96-3658), which aretwo cases pending before the Seventh Circuit United States Court of Appeals. In themeantime, this is how the battle is being fought.
The First Line of Defense
Plaintiffs’ interpretation of the “Holder In Due Course” language can be resistedon at least two grounds. First, it can be argued that if the Rule which requires thelanguage really did override TILA‘s limitation on assignee liability,
it would render anessential element of TILA’s statutory framework a complete nullity.
No

Activity (11)

You've already reviewed this. Edit your review.
1 hundred reads
1 thousand reads
dbush2778 liked this
83jjmack liked this
Robert D House liked this
Ren liked this
Joe Esquivel liked this
THEYDONTWIN liked this
David Kupfer liked this

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->