Letter From Stephanie Rosenthal, Chief of Staff, Division of Financial Practices, Bureau of Consumer Protection, To Jeff Appel, Deputy Under Secretary, U.S. Department of Education

This Commission Staff Advisory Opinion (1) explains that the Commission's Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses, 16 C.F.R. § 433 (the Holder Rule) protects consumers who enter into credit contracts with a seller of goods or services by preserving their right to assert claims and defenses against any holder of the contract, even if the original seller subsequently assigns the contract to a third-party creditor, and (2) advises the U.S. Department of Education that -- just as courts commonly allow consumers to assert time-barred claims defensively, even if they would not be able to assert such claims in an affirmative lawsuit -- the Holder Rule would permit the time-barred claims or defenses against the holder, if state law would permit the time-barred claims or defenses against the seller.