Federal Credit Report

It has two specific regulations - the Holder-in-Due-Course and the Credit Practices rule - with which we have been working for years and which are still very important today. Holders -in-Due-Course Regulation, 16 C.F.R. Part 433, was the first acknowledgement that a creditor who assigns credit agreements to a seller of goods (furniture, car, etc.) should not be immunized against a buyer's claim against an originator seller.

There was a common law lesson in the preceding few years that said that an agent who was a holder-in-due-course of a bond was not responsible for the actions of the principal without knowing the debtor's right under the deed. FTC research showed that too many customers were exploited by ruthless vendors; and the way to put an end to this was to ensure that assignors of credit agreements for customers accepted and kept such agreements without prejudice to any action the borrower might have brought against the vendor of such goods.

In 1976, for example, the FTC adopted a decree stipulating that each credit agreement for consumers must contain a particular idiom which, in reality, would destroy the teaching of the dual course of study holders on credit for consumers. In 1985, following the successful outcome of this previous regulatory work, the FTC adopted an even more comprehensive Credit Practices Rule.

Credit Practice Rule targeted specifically unethical and misleading credit practice, which was widespread at the point in question. Firstly, the Regulation identified certain practice as naturally disloyal, such as the letter of a consumption agreement providing for the use of a "commitment to judgement" or the "waiver of the right to exemption" for goods not covered by the agreement.

Second,'household goods' (such as clothes, furnishings, household utensils, cooking utensils and household effects) cannot be the object of a non-ownership interest unless they are bought in the agreement. Thirdly, the Regulation provides that it is a misleading practise for a believer to present incorrectly the way in which a loan is "co-signed".

In fact, the Regulation reiterates a particular linguistic expression in the shape of a "communication to the co-signatory" which must be used. It deals with particular actions and practice of a creditor which the FTC Commissioners found unjust or misleading in relation to credit to consumers. I then propose the following best practice with this explanation:

Practise Pointer #1: Review the small printed text of your Memo and Instalment Purchase Agreements to be completely sure you are not asserting any waiver or right forbidden in such agreements. Exercise #2: Look at the course material to make sure it matches the prescribed course material.

Practical pointer #3: If you involve co-signatories as debtors for consumers debts, make sure you give these co-signatories the complete and proper notification needed.