Referral and Indirect Lending Relationships
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Author:  admin [ Sat Sep 23, 2006 6:39 am ]
Post subject:  Referral and Indirect Lending Relationships

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].

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