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The Maine Credit Union League recently joined every other state credit union league and association nationwide in signing onto a joint letter led by America’s Credit Unions urging the Federal Trade Commission (FTC) to withdraw a 2022 advisory opinion related to the FTC’s “Holder Rule” and attorneys’ fees.
The Holder Rule was originally established to preserve consumers’ ability to raise claims and defenses against lenders in certain seller-arranged financing transactions. Since the Rule’s adoption in 1975, it has included a cap stating that a consumer’s recovery against a lender “shall not exceed amounts paid by the debtor” under the contract.
However, a 2022 FTC advisory opinion interpreted that cap as not applying to attorneys’ fees and legal costs awarded under separate state laws. Credit unions and other lenders argue that this interpretation dramatically expands lender liability beyond the original loan amount, even in situations where the lender had no role in the seller’s misconduct.
The issue has become particularly significant in areas such as residential solar financing, where lender exposure in some cases has greatly exceeded the value of the original loan. Industry leaders also warn that the same legal theories could increasingly impact indirect auto lending, home improvement financing, buy-now-pay-later programs, and other merchant-arranged lending relationships.
The joint letter asks the FTC to withdraw the 2022 advisory opinion, reconsider prior guidance expanding the Rule’s application to larger transactions, and reaffirm the longstanding interpretation that lender liability under the Holder Rule should remain capped at the amount paid by the borrower.