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Consumer Credit Regulation: 7.7.8.1b.1 Introduction

A consumer has three avenues to raise defenses against a card issuer concerning a merchant’s credit card charges appearing on the consumer’s statement. All three are based on rights found in the federal Truth in Lending Act (TILA):

Consumer Credit Regulation: 7.7.8.2.1 General requirements to attain the rights of a holder in due course

The common law rule is that an assignee is subject to all defenses and claims in recoupment that the consumer could raise against the assignor.618 But section 3-305 of the Uniform Commercial Code (UCC) generally allows an assignee of a promissory note or other negotiable instrument to be free from those claims and defenses if it has attained the status of a holder in due course or acquired the rights of a holder in due course.619

Consumer Credit Regulation: 7.7.8.2.2 No holder-in-due-course rights where note contains FTC Holder Notice

There can be no holder-in-due-course status when the credit agreement contains the FTC Holder Notice since that notice is inconsistent with holder-in-due-course status. UCC Article 3 states that when the notice is in the contract “there cannot be a holder in due course of [such an] instrument.”634 Since the notice is in the note from the origination, no holder obtains holder-in-due-course rights, so no subsequent holder can acquire the rights via the shelter rule.

Consumer Credit Regulation: 7.7.8.2.4 No holder in due course rights unless the note’s amount and due date are fixed

If a loan is not a negotiable instrument, then no holder of that instrument can become a holder in due course. A negotiable instrument must contain a promise to pay a fixed amount of money.645 Consequently, there can be no holder in due course relating to any open-end credit obligation. The amount of principal owed on open-end credit is unknown at the time the loan is originated and the amount changes over time.

Consumer Credit Regulation: 7.7.8.2.6 Sloppy transfer of a note

For an entity to become a holder in due course, it must be a “holder” of a negotiable instrument, meaning that the instrument must be negotiated to that entity. If the instrument is not negotiated properly, then the party seeking to enforce the instrument is not in fact a holder of the instrument. Often, due to sloppy paperwork, negotiation does not take place or the assignee cannot prove that it properly took place, and thus the assignee is not a holder or a holder in due course.

Consumer Credit Regulation: 11.3.4.2 Limits on Term and Payment Schedule

A few RISAs provide a limit on the term of an installment sales contract.91 More common are restrictions on irregular payments. Many RISAs require that the obligation be repayable in substantially equal installments except in limited circumstances. A requirement of substantially equal installments effectively bans balloon payments. Many RISAs also require that the payments be spaced out at equal intervals. Most of these laws allow the schedule of payments to be adjusted to the seasonal or irregular income of the debtor.

Consumer Credit Regulation: 14.5 Settlements or Judgments (“Factoring”)

Tort or other legal settlements are often structured to provide payment over a period of years.96 Beneficiaries of structured settlements—who may be financially desperate or impaired by their injuries—are vulnerable to predatory transactions whereby they sell, assign, or pledge a large number of future payments in return for upfront cash.97 Challenging these transactions as loans may be tricky, especially in states that have a statuto

Federal Deception Law: 6.3.6.3.4 Scope of consent

Even if providing a cell phone number can be construed as consent to receive certain robocalls, it should not be construed as consent to receive them on any and all topics. Thus, a second question is whether, by providing a cell phone number, the consumer consented to the subject matter of the autodialed calls.491 In 2012, the FCC stated:

Federal Deception Law: 6.3.6.4.1 Courts’ interpretation of “called party” and their treatment of reassigned numbers

The TCPA requires that the caller have the consent of the “called party” to make an autodialed or prerecorded call to a cell phone.504 Many courts have held that consent must be given by the person who presently subscribes to or uses the cell phone.505 Thus, a non-debtor who receives an autodialed or prerecorded collection call on a cell phone has standing to bring a TCPA claim.506 For example, if a debt collector places automated calls to a cell n

Federal Deception Law: 6.3.6.5.2 What methods of revoking consent are reasonable?

The FCC’s 2015 declaratory ruling, upheld by the D.C. Circuit,548 makes clear that any statement in which “the called party clearly express[es] his or her desire not to receive further calls” is sufficient to show revocation.549 To assess whether any particular means of revocation used by a consumer is reasonable, the FCC stated that it would:

Federal Deception Law: 6.3.6.5.4 Can the consumer’s manner of revoking consent be limited by contract?

A related issue regarding revocation of consent is whether the method of revoking consent can be limited or controlled by the terms of a contract in which consent was granted. One district court decision held that a contract cannot impose a requirement that revocation of consent be in writing.600

A number of statements in the FCC’s 2015 order strongly suggest the view that the creditor cannot impose contractual terms that dictate a particular manner of revoking consent. The FCC stated:

Federal Deception Law: 6.3.6.5.5 Partial revocation of consent

A 2017 Eleventh Circuit decision holds that, just as a consumer can provide limited consent to receive robocalls, a consumer can also partially revoke consent.608 In the case before it, the consumer had attempted to revoke consent to receive debt collection calls during her working hours. The court held that she had the right to do so and remanded for a jury determination of whether her instructions to the creditor were clear enough.

Federal Deception Law: 6.3.6.6 No Established Business Relationship Exception

In contrast to the TCPA provisions dealing with junk faxes609 and the nationwide do-not-call rule,610 there is no exception for autodialed or prerecorded calls to cell phone numbers of persons with whom the caller has an established business relationship.611 The consent requirements described in the preceding subsections apply regardless of the existence of an established business relationship.