Purpose Behind the FTC Holder Rule/Notice
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Author:  admin [ Sat Sep 23, 2006 6:57 am ]
Post subject:  Purpose Behind the FTC Holder Rule/Notice

The Purpose Behind the Notice

In 1975, the FTC concluded that unethical merchants and their financiers were using the venerable Holder in Due Course doctrine from the law of negotiable instruments to victimize thousands of innocent consumers. Inner-city stores were selling shoddy furniture, fly by night contractors were promising to install aluminum siding that never appeared, the proverbial used car dealers were hawking lemons, and countless other shady characters were operating in similar fashion in scores of different fields. In each of these cases, the defrauded consumer was saddled with the bill when a holder in due course demanded payment. M. Sturley, The Legal Impact of the Federal Trade Commission's Holders in Due Course Notice on a Negotiable Instrument: How Clever are the Rascals at the FTC?, 68 N.C.L.Rev. 953 [1990]; J. White, et al, Uniform Commercial Code, Sec. 17-9, at 181 [4th ed.1995]. The purpose of 16 C.F.R. 433.2 is to “reallocate the cost of seller misconduct to the creditor, who is in a better position to absorb the loss or recover the cost from the guilty party--the seller.â€

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