/* Here's the full text of the Federal Trade Commission's Holder

in Due Course Rule. This is one of consumer's most important

protections in the never ending battle between consumer's rights

and bad business. Under this rule, virtually every consumer

transaction in which a loan is made, if the finance contract is

assigned to a lender, then the lender IS SUBJECT TO ALL OF THE

CLAIMS that the consumer has against the original seller. This

means that if you enter into an agreement and then properly

refuse to pay because the merchandise is defective, then if the

finance contract has been assigned, you nevertheless may assert

the same claims against the holder of the contract. In other

words, in a consumer transaction where this notice appears, a

bank or other lender that later purchases your finance contract

cannot tell you to bring your complaints against the original

seller, and that it's not their problem-- because it is. Of

course, a business transaction is NOT subject to these rules. */

Part 433 of 16 Code of Federal Regulations

PRESERVATION OF CONSUMERS' CLAIMS AND DEFENSES

Section 433.1

Definitions-

(a) "Person." An individual, corporation, or any other

business entity.

(b) "Consumer." A natural person who seeks or acquires goods

or services for personal, family, or household use.

(c) "Creditor." A person who, in the ordinary course of

business, lends purchase money or finances the sale of goods or

services to consumers on a deferred payment basis. Provided, such

person is not acting, for the purposes of a particular

transaction, in the capacity of a credit card issuer.

(d) Purchase money loan." A cash advance which is received

by a consumer in return for a "Finance Charge" within the meaning

of the Truth in Lending Act and Regulation Z, which is applied,

in whole or in substantial part, to a purchase of goods or

services from a seller who (1) refers consumers to the creditor

or (2) is affiliated with the creditor by common control,

contract, or business arrangement.

(e) "Financing a sale." Extending credit to a consumer in

connection with a "credit sale" within the meaning of the Truth

in Lending Act and Regulation Z.

(f) "Contract." Any oral or written agreement, formal or

informal, between a creditor and a seller, which contemplates or

provides for cooperative or concerted activity in connection with

the sale of goods or services to consumers or the financing

thereof.

(g) "Business arrangement." Any understanding, procedure,

course of dealing, or arrangement, formal or informal, between a

creditor and a seller, in connection with the sale of goods or

services to consumers or the financing thereof.

(h) "Credit card issuer." A person who extends to

cardholders the right to use a credit card in connection with

purchases of goods or services.

(i) "Consumer credit contract." Any instrument which

evidences or embodies a debt arising from a "Purchase Money Loan"

transaction or a "financed sale" as defined in paragraphs (d) and

(e) of this section.

(j) "Seller." A person who, in the ordinary course of

business, sells or leases goods or services to consumers.

Section 433.2

Preservation of consumers' claims and defenses-

In connection with any sale or lease of goods or services to

consumers, in or affecting commerce as "commerce" is defined in

the Federal Trade Commission Act, it is an unfair or deceptive

act or practice within the meaning of section 5 of that Act for a

seller, directly or indirectly, to:

/* Every sale of something by a person in the business of selling

is going to affect commerce, since they have used the telephones,

mails or other instrumentalities of commerce at least once, or,

at least, have had a customer from across a state line or a

delivery from across a state line. */

(a) Take or receive a consumer credit contract which fails

to contain the following provision in at least ten point bold

face, type:

NOTICE

ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO

ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE

SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE

PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT

EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.

or,

(b) Accept, as full or partial payment for such sale or

lease, the proceeds of any purchase money loan (as purchase money

loans is defined herein), unless any consumer credit contract

made in connection with such purchase money loan contains the

following provision in at least ten point, bold fact, type:

NOTICE

ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO

ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE

SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE

PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT

EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.