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Consumer Credit Regulation: 3.10.5.1 General

As described in § 3.10.4, supra, the rule for special usury statutes is usually that the forum state’s law applies. But this choice of law rule often does not apply for general usury statutes, at least in the commercial context.

Consumer Credit Regulation: 3.10.6 Military Small Loan Companies and the Military Lending Act

Lenders may target personnel at military bases who are not legal residents of the state where the base is located. Since many state credit laws apply only to state residents, these lenders argue that the laws of the state where the military base is located do not apply, allowing the lender to use interest rates and credit regulation of the state where the lender is headquartered or licensed.

Consumer Credit Regulation: 11.5.4.6 Force-Placed Insurance

Unraveling the terms and amount due for motor vehicle credit is often complicated by the presence of force-placed insurance, which itself can involve any number of abuses. RISCs almost universally require that the consumer maintain collision, fire, and theft insurance on the vehicle being purchased on credit. If the consumer never purchases that insurance or lets it lapse, the credit agreement typically authorizes the creditor to purchase this insurance for the consumer and add the cost onto the amount owed, financing it on the same terms as the underlying obligation.

Consumer Credit Regulation: 11.6.1 Introduction

This section provides a list of notable subjects that may arise in automobile sales and finance transactions, pinpointing the subsections where such topics are discussed in this and other NCLC treatises. The references to sections of various NCLC treatises are all live links, but the link will provide access only if a subscription includes the applicable referenced treatise.

Consumer Credit Regulation: 11.7.1 Overview and Background

Manufactured home credit sales and other manufactured home financing raise special issues not applicable to motor vehicle or other types of installment sales. This difference results both from the ways the manufactured homes are sold and from the fact that manufactured homes involve a consumer’s residence.

Consumer Credit Regulation: 11.7.3 Federal Preemption of State Law Credit Terms

A number of different forms of federal preemption may impact the ability of a state installment sales act to regulate the terms of manufactured home credit. Since by definition installment sales credit is originated by a dealer and not by a federal or federally insured depository, rate exportation does not apply.550 Rate exportation only applies where a depository originates the credit.

Consumer Credit Regulation: 11.7.4 Truth in Lending Act

The disclosure requirements of the Truth in Lending Act (TILA) apply to manufactured-home credit just as they would to any other credit transaction. TILA also places a number of substantive limits on residential mortgage transactions. Because TILA defines the term “dwelling” to include manufactured homes,559 these substantive limits generally apply to manufactured-home finance, whether state law treats them as personalty or realty.

Consumer Credit Regulation: 11.7.5 Real Estate Settlement and Procedures Act

The federal Real Estate Settlement Procedures Act (RESPA) and its Regulation X provide protection for consumers buying a home. When RESPA applies, it requires disclosures about closing costs both before and at the time of settlement, notices about escrow accounts and servicing transfers, and the right to obtain account information through a written request that meets certain requirements. RESPA also prohibits kickbacks and unearned fees for settlement services, charges for preparation of certain documents, and the steering of borrowers to a particular title insurance company.

Consumer Credit Regulation: 11.7.6 Federal Rebate Statute

The federal rebate statute requires rebates to be calculated by a formula at least as fair to the consumer as the actuarial method, for transactions with terms longer than sixty-one months.586 This statute applies to any credit, whether it is mortgage or chattel credit. Since most manufactured home credit has a term exceeding sixty-one months, federal law requires use of an actuarial rebate for manufactured home installment credit even if the state RISA does not.

Collection Actions: 15.3.5 FEMA Disaster Relief Assistance

One of the primary federal programs available to help individual victims of disaster is the Individuals and Households Program (IHP), administered by the Federal Emergency Management Agency (FEMA).357 One component of IHP is housing assistance,358 which may be used to pay for rent, repair, or housing construction.

Consumer Credit Regulation: 11.7.7.1 Differences Between State Personalty and Realty Law

A manufactured home, when sold by a dealer and not in conjunction with a land sale, invariably is considered personal property for purposes of the operation of state law. Whether the home is treated as personalty (i.e., a chattel) or realty becomes more complicated once the home is sited on land, and this distinction may have major consequences for the home’s treatment both by state law and by the creditors themselves.

Consumer Credit Regulation: 11.7.7.2 Are Manufactured Homes Categorized as Realty or Personalty?

Most states have statutes that specify if and when manufactured homes can be classified as real property. This classification may apply if the home is attached to land that the homeowner owns, or, in some states, is renting on a long-term lease.597 The statues often set forth a procedure for a manufactured home to become real property,598 but the statute may be unclear as to whether this is the only process to convert the home to real property.

Consumer Credit Regulation: 11.7.8 State UDAP Statutes

Unfair and deceptive acts and practices (UDAP) statutes clearly apply to a dealer’s manufactured home sale practices. As with car financing, there is an issue though whether some state UDAP statutes apply to credit practices.603 But even in these states, the sale of the home and services related to the financing should still be covered.604

Consumer Credit Regulation: 11.8.1 Holder-in-Due-Course Doctrine Inapplicable

A holder in due course of a promissory note arising out of a consumer transaction is immune from most of the consumer’s seller-related claims and defenses.610 In addition, under the “shelter rule,” one who acquires a promissory note from a prior holder in due course has this same protection, even if the new holder would not qualify as a holder in due course, as long as the new holder did not engage in fraud or illegality affecting the instrument.611

Consumer Credit Regulation: 11.8.2 Assignee Liability and Waiver-of-Defense Clauses

Since an assignee of the installment sales contract is not a holder in due course, the general rule under the UCC is that the assignee stands in the shoes of the seller and is subject to seller-related defenses.619 (When the consumer wishes to bring an affirmative claim against the assignee for seller-related conduct, the consumer will have to find an alternative theory.620) Only if there is an enforceable waiver-of-defense clause can the creditor avoid the defenses that would be good a

Consumer Credit Regulation: 11.8.3.2 Notice Required by Rule Provides Consumer Rights

The FTC Holder Rule requires credit sellers to place a notice in the installment sales agreement (the FTC Holder Notice) that the holder is subject to all claims and defenses related to the seller.626 Even when there is a direct loan from a lender to the consumer, the seller must still arrange for the notice to be included in the note when the seller refers the consumer to a lender or has a business relationship with that lender.627 The FTC Holder Rule and state analogs are discussed in detail i

Consumer Credit Regulation: 11.8.3.3 The Consumer’s Maximum Recovery

If the consumer’s defenses and claims are significant enough, the consumer’s claims and defenses can offset all remaining indebtedness, and the consumer can also recover any amount paid under the loan or contract. This is a maximum amount that the consumer can recover from the assignee or lender for the seller’s misconduct. Of course, the consumer can recover amounts over and above the FTC Holder Rule maximum if the consumer has independent claims against the holder for the holder’s own conduct (for example for collection abuse).632