Shira purchased a refrigerator from ABC Appliance store for $800. She takes the refrigerator home and discovers that it is defective. She calls ABC Appliance store and tells them that she would like to return the refrigerator. ABC Appliance store tells her that they have assigned the promissory note she provided the store in order to purchase the refrigerator to a finance company and that the finance company, as a holder in due course, is not subject to defenses. Which of the following is true regarding the rights of parties?

A) The finance company is subject to the defenses of Shira because of the Federal Trade Commission rule created to protect consumers.
B) ABC Appliance store is correct in that Shira cannot assert her defenses against the finance company.
C) Shira can assert her defenses against the finance company only if she can prove that the finance company had knowledge that ABC Appliance store sold defective equipment from time to time.
D) Shira can assert her defenses against the finance company only because she gave notice of the problem within 5 days of the sale.
E) Shira can assert her defenses against the finance company only if she agrees to arbitrate the dispute.

Question

Jaspreet kaur Dhillon · Accepted Answer

Final Answer : A, Explanation :  The Federal Trade Commission (FTC) rule, often referred to as the FTC Holder Rule, allows consumers to assert the same defenses against a finance company that holds their debt as they could against the seller of the goods. This means that despite the finance company being a holder in due course, Shira can still assert her defenses regarding the defective refrigerator against them.

Definitions

Learning Objectives

Learning Objectives

Related questions