Minds → Consumer Protection → What rights do consumers keep when their credit contract is sold to another company? Answer in under 100 words. Cite only eCFR (www.ecfr.gov) sources.

US Federal

What rights do consumers keep when their credit contract is sold to another company? Answer in under 100 words. Cite only eCFR (www.ecfr.gov) sources.

Under 16 CFR 433.2 (the FTC Holder Rule, as published in 40 FR 53506 on Nov. 18, 1975), a consumer credit contract must contain a ten-point bold-face NOTICE stating that any holder is subject to all claims and defenses the debtor could assert against the seller. Recovery by the debtor, however, is limited to amounts paid under the contract. This rule also covers purchase money loans, as defined in 16 CFR 433.1.

Last verified: 2026-08-27 · Sources checked: 1/1 resolving · Next scheduled review: 2026-11-25

Details / How it works

When a consumer credit contract is assigned, transferred, or sold to another company, the FTC Holder Rule (16 CFR 433.2) preserves the consumer's (debtor's) right to raise against the new holder any claims or defenses the consumer could have raised against the original seller of the goods or services, or against the seller that received the proceeds of a purchase money loan. The rule is implemented by requiring the contract to carry a specific NOTICE provision in at least ten-point, bold-face type so the consumer is on notice of these preserved rights.

Numbers & thresholds

Item	Requirement
Required Notice font	At least 10-point, bold-face type
Scope	Consumer credit contracts and purchase money loans (16 CFR 433.1)
Debtor recovery cap	Limited to amounts paid by the debtor under the contract
Promulgation	40 FR 53506 (Nov. 18, 1975); amended 40 FR 58131 (Dec. 15, 1975)

Exceptions & edge cases

The Holder Rule's protection runs to the debtor/consumer, not to the holder; the rule limits the debtor's monetary recovery to amounts already paid under the contract. It also reaches purchase money loans—cash advances used to buy goods or services from a seller who refers the consumer to, or is affiliated with, the creditor—so creditors who accept those loan proceeds are equally bound to honor the debtor's preserved claims and defenses.

Sources

[1]U.S. Government Publishing Office / Federal Trade Commission — 16 CFR 433.2 — Preservation of consumers' claims and defenses in consumer credit contracts · as of 2026-08-27

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