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PostPosted: Sat Sep 23, 2006 6:39 am 
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Joined: Fri Jul 14, 2006 6:19 am
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The Federal Trade Commission has also included within the reach of the Holder Rule those sellers and creditors who "employ procedures in the course of arranging the financing of a consumer sale which separate the buyer's duty to pay for goods or services rendered from the seller's reciprocal duty to perform as promised." 40 F.Reg. 53,506, 53,522 [1975]. The agency has recognized this practice as "dragging the body," wherein a merchant, desiring to circumvent restrictions upon the holder in due course doctrine, arranges for a consumer purchase to be financed by a cooperating financing agency. The resultant financial transaction has the appearance of a direct cash loan, payment of which can be enforced by the loan company without reference to the underlying transaction. In re Brown, 134 B.R. 134, 135 [Bankr.E.D.Pa.1991]; Associates Home Equity Services, Inc. v. Troup, 343 N.J.Super. 254, 778 A.2d 529 [N.J. Super. A.D. 2001].

David Szwak
Chairman, Consumer Protection Section, Louisiana State Bar Association
Bodenheimer, Jones & Szwak
509 Market Street, 7th Floor
Mid South Tower
Shreveport, Louisiana 71101
Fax 318-221-6555

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