Consumer Credit Contracts

[David A. Szwak]

Consumer Credit Contracts

The FTC Holder Rule applies to consumer credit contracts. A "[c]onsumer credit contract" is defined as "[a]ny instrument which evidences or embodies a debt arising from a 'Purchase Money Loan' transaction or a 'financed sale' ...." 16 C.F.R. at § 431.1 [2001]. The FTC Holder Rule, 16 C.F.R. §433.1[e], defines "[f]inancing a sale" as "[e]xtending credit to a consumer in connection with a 'Credit Sale' within the meaning of the TILA and Regulation Z." TILA, specifically 15 U.S.C.A. § 1602[g] defines "credit sale" as: “any sale in which the seller is a creditor. The term includes any contract in the form of bailment or lease if the bailee or lessee contracts to pay as compensation for use a sum substantially equivalent to or in excess of the aggregate value of the property and services involved and it is agreed that the bailee or lessee will become, or for no other nominal consideration has the option to become, the owner of the property upon full compliance with his obligations under the contract.â€