WASHINGTON (2/11/16)--While the Credit Union National Association (CUNA) supports compliance with the Federal Trade Commission’s (FTC) Holder Rule, it worries that credit unions could be held liable for bad behavior of others when it is beyond their ability to prevent it.
CUNA filed a comment letter with the FTC Wednesday, in response to the agency seeking public comment about the efficiency, costs, benefits and impact of the Holder Rule.
Officially known as the Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, the Holder Rule preserves consumers’ rights to assert the same legal claims and defenses against anyone who purchases a credit contract, as they would have against the seller who originally provided the credit.
Credit unions that engage in indirect auto lending, as well as situations where a credit union is considered both the seller and the lender, such as credit union sales of repossessed property, could also fall under the rule’s scope.
“Some credit unions have expressed concern to CUNA 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,” CUNA’s letter reads. “As such, we urge the FTC to consider the fact that in consumer contracts, there are certain aspects of consumer protection that are beyond a first party creditor’s control once the contract is assigned. The FTC should consider this if changes are made to the Holder Rule.”
CUNA believes that it is unnecessary to expand the scope of the Holder Rule.
“Overall, credit unions already have many systems in place to protect their members when they are making decisions in the financial marketplace,” the letter reads. “Credits unions are facing an unprecedented number of regulatory burdens. To the extent that regulators can take actions to relieve these burdens on credit unions, and allow them to concentrate on serving more members and providing more diverse products and service offerings, they should.”