Asked by Shauna Shirk on Jun 07, 2024
Verified
Under rules created by the FTC in the 1970s:
A) Finance companies that have purchased negotiable installment notes from a seller are not subject to the claims and defenses that a debtor could assert against the seller, and therefore have all the rights of an HDC.
B) Finance companies that have purchased negotiable installment notes from a seller are subject to the same claims and defenses that a debtor could assert against the seller, and do not have the rights of an HDC.
C) A subsequent holder who knows a check was dishonored when he purchased it may not receive payment under the Shelter Principle.
D) A subsequent holder may not receive payment on a check that was dishonored even if he was not aware it was dishonored when he purchased it.
E) Finance companies may avoid a debtor's claims and defenses if they can prove they and the transferor company were not closely connected and they had no knowledge of the seller's promises.
FTC
The Federal Trade Commission, a U.S. federal agency responsible for consumer protection and the prevention of anti-competitive business practices.
Negotiable Installment Notes
Debt instruments that promise repayments in a series of payments and are transferable to others.
Finance Companies
Businesses that provide loans to individuals or corporations, excluding banks and other traditional financial institutions.
- Understand the implications of the FTC rules established in the 1970s for protecting consumers against HDC abuses.
Verified Answer
AA
Avery ArringtonJun 10, 2024
Final Answer :
B
Explanation :
Under the rules created by the FTC in the 1970s, finance companies that have purchased negotiable installment notes from a seller are subject to the same claims and defenses that a debtor could assert against the seller. This means they do not have the rights of a holder in due course (HDC), which would otherwise allow them to be free from such claims and defenses. This rule was established to protect consumers from unfair practices.
Learning Objectives
- Understand the implications of the FTC rules established in the 1970s for protecting consumers against HDC abuses.