Removing Barriers Blog

CUNA Submits Comment on Holder Rule Review
Posted February 10, 2016 by Chandler Schuette

In response to the Federal Trade Commission’s (FTC) review of the Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses (Holder Rule), we wrote a comment letter with credit union input.

This rule is most relevant to credit unions who engage in indirect auto lending, but the rule may also apply in any situation where the credit union is considered both the seller and the lender. An example of this could be credit union sales of repossessed property.

In the comment to the FTC, we expressed support for the goal of this rule to protect consumers from any harmful practices during the purchase of consumer goods or service, and noted that credit unions are already complying with this goal. The comment outlines the many ways credit unions are already acting to protect members who are making choices in the financial marketplace.

However, the comment also noted that some credit unions have concerns as a result of this rule about the possibility of being held liable for the bad behavior of others when it is beyond their ability to prevent it. These credit unions stated that no matter how many controls they put in place during the review process of an indirect loan, it can be impossible in some circumstances to prevent fraud or mistreatment of the consumer further down the line. Adding that if they were part of the underwriting process this would defeat the purpose of an indirect loan.

The comment stated that the recent addition of a new regulator for consumer financial issues, in conjunction with the credit union industry’s history of compliance with the Holder Rule, renders it unnecessary to expand its scope in any way.