Many times I get calls from consumers who know that their dealer has defrauded them my misrepresenting the car, or by selling a car without a valid passing emissions certificate, or by selling a car that has title issues and cannot be registered. These folks are often faced by a finance company that financed the purchase of the car claiming that the dispute is between the consumer and the dealer and that the consumer has to pay the finance company anyway. This article is to provide information to the consumer on their defense.
Anytime that a consumer signs a retail installment sales contract at a dealer which is then assigned to the bank or finance company, the Federal Trade Commission has mandated that the contract contain the following language:
ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.
This language is mandated by Federal Trade Commission’s Rule on Preservation of Consumer Claims and Defenses, 16 C.F.R. §433. It is designed specifically to protect the consumer against this argument by the finance company/bank. What is means is that the consumer does not have to pay the bank/finance company if the consumer has a valid claim that the dealer committed fraud or breached the contract.
Georgia law also mandates that this language be present in all contracts for the finance of consumer goods. Ga. Ad. Code 122-5-.01.
For More Information on the FTC Anti Holder Rule Clause: