The Holder Rule Permits Action Against A Lender To The Same Extent An Action Could Be Brought Against The Seller Of A Mobile Home.

Plaintiffs bought a motor home that was financed with an installment contract. Shortly after the sale, the contract was assigned by the dealership to a bank. Plaintiffs assert the motor home was defective from the start. After months passed without the demanded repairs being made, plaintiffs disclaimed their ownership in the vehicle and sued the dealership. They also sued the bank on the ground the Holder Rule allows them to assert all claims against the bank they otherwise had against the dealer. The Holder Rule, set forth in title 16, section 433.2 of the Code of Federal Regulations requires the following language in 10-point (or larger) and bold typeface:  “NOTICE: ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER.” The trial court concluded the Holder Rule did not allow plaintiffs to assert claims against the lender, entered judgment for the bank and awarded attorney fees to the bank. The appellate court reversed, stating the plaintiffs may assert all claims against the bank they might otherwise have against the dealership, but added:  “Under the Holder Rule, however, the [plaintiffs] may recover no more than what they actually paid toward the installment contract.”  Lafferty v. Wells Fargo Bank  (Cal. App. Third Dist.;  February 4, 2013) (Case No. C067812).