UNITED STATES OF AMERICA

Federal Trade Commission

WASHINGTON, D.C. 20580

Bureau of Consumer Protection

Division of Financial Practices

April 12, 2021

Staff Note Regarding the Holder Rule and Large Transactions

The Commission’s Trade Regulation Rule Concerning Preservation of Consumers’ 

Claims and Defenses, 16 C.F.R. Part 433 (commonly known as “the Holder Rule”), does not 

contain a maximum transaction limit. In 1976, however, FTC staff issued guidelines, which

were never adopted by the Commission, that stated that the Holder Rule “incorporates” an 

exemption for large transactions in the Truth in Lending Act (“the TILA”), 15 U.S.C. § 1603, 

and Regulation Z, 16 C.F.R. Part 226.

1

 Prompted by comments taking opposing views on 

whether the Holder Rule incorporates the TILA’s exemption for large transactions, staff has 

reexamined this issue.

2

 We conclude that this statement in the 1976 staff guidelines is contrary 

to the text of the Holder Rule and the intent of the Commission when the Holder Rule was 

adopted.

Because the Holder Rule was not adopted pursuant to the TILA, it is not inherently 

subject to the exemptions set forth in that Act.3 Nor does the text of the Rule adopt the TILA’s 

exemption for large transactions. To the contrary, when the Rule was adopted in 1975, the 

Commission declined to adopt such a limitation. Some industry representatives requested an 

exemption for high price sales, but the Commission expressly rejected this proposal, stating that 

the practice that the Rule addresses “does not cease to be unfair simply because it involves a 

larger amount of money.”4 On its face, the Holder Rule applies to the sale or lease of goods or 

services to consumers with no ceiling on the size of the transaction.5

 1 Guidelines on Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, at 

9, 41 Fed. Reg. 20022, 20024 (May 14, 1976) (“Additional limitations on [transactions to which the 

Holder Rule applies] are present because the definitions of ‘Financing a Sale’ and ‘Purchase Money 

Loan’ expressly refer to the Truth in Lending Act and Regulation Z, and thus incorporate the limitations 

contained in these laws. As a result, even with respect to transactions involving a sale of consumer goods 

or services, a purchase involving an expenditure of more than $25,000 is not affected by the Rule.”). 

Staff notes that a growing number of consumer transactions, such as automotive loans, involve 

expenditures or finance charges that exceed $25,000.

2 See Confirmation of rule, 84 Fed. Reg. 18711 n. 5 (May 2, 2019) (discussing comments received during 

regulatory review of the Holder Rule and stating that staff will review the relevant guidelines and 

educational materials in light of these comments).

3 See Final Regulations, 40 Fed. Reg. 53506, 53523 (1975) (citing FTC Act as authority for promulgating 

the Rule).

4 40 Fed. Reg. at 53527.

5 16 C.F.R. § 433.1(b), 433.2.
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The argument that the transaction limit in the TILA applies to the Holder Rule has arisen 

because the Rule borrows the definitions of “Finance Charge” and “Credit Sale” from the TILA 

to identify the credit agreements in which the Rule’s notice must appear.6

 These definitions, 

however, do not contain a limitation based on the amount of the transaction or financing.

7

 Since 

the TILA was enacted in 1968, the TILA’s exemption for large transactions has always been in a 

separate section – section 104.8

The text of the Holder Rule does not incorporate these TILA exemptions explicitly or by 

cross-referencing section 104 of the TILA. Under general principles of statutory and rule 

construction, the breadth of a given term is a separate issue from whether exemptions that appear 

elsewhere apply.9 In addition, a statute or regulation that borrows or references portions of 

another law does not incorporate all of the limitations in the law that is referenced.10

Thus, as the Commission stated in 1975 when it announced the Holder Rule, the Rule is 

not limited to transactions below a certain amount.

11 The Commission explicitly rejected 

industry proposals to insert a limitation, and the Rule itself includes no such limitation, directly 

or by reference to the TILA limitations set forth in section 104 of that statute. Although the 1976 

staff guidelines stated that that the Holder Rule “incorporated” TILA exemptions, those 

guidelines included a preface that cautioned that the guidelines had not been formally reviewed 

or adopted by the Commission, and did not alter or amend the Rule or the official Statement of 

Basis and Purpose published with the Rule.12 Thus, the statement that the Holder Rule 

 6 Id. § 433.1(d), (e).

7 15 U.S.C. §§ 1602(h), 1605(a) (2020); 12 C.F.R. §§ 1026.2(a)(16), 1026.4(a).

8 15 U.S.C. § 1603 (2020); Pub. L. 90-321, Title I, § 104, May 29, 1968, 82 Stat. 147 (codified as 15 

U.S.C. § 1603). In 1975, Section 104 of the TILA exempted credit transactions, other than real property 

transactions, in which the total amount to be financed exceeded $25,000. 15 U.S.C. § 1603(3) (1970). In 

2010, the Dodd-Frank Act amended this exemption by substituting $50,000 for the $25,000 ceiling and 

mandating future adjustments for inflation. Pub. L. No. 111-203, § 1100E, 124 Stat. 2111, 1871 (2010); 

see also 76 Fed. Reg. 18354 (Apr. 4, 2011) (amending Reg. Z to implement new ceiling and inflation 

adjustments); 12 C.F.R. Part 1026, Supp. I, Official Interpretations, Section 1026.3 - Exempt 

Transactions, 3(b) Credit Over Applicable Threshold Amount (2020).

9 Cf. Energy Research Found. v. Def. Nuclear Facilities Safety Bd., 917 F.2d 581, 582 (D.C. Cir. 1990) 

(whether a government board is an “agency” within the statutory meaning of the term in open government 

laws is a separate issue from whether exemptions in the statutes allow it to close meetings or withhold 

records.)

10 Cf. United States v. Kirvan, 86 F.3d 309, 313 (2d Cir. 1996) (“An exception in a statute is presumed to 

apply only to the section to which it is attached.)

11 40 Fed. Reg. at 53527.

12 Guidelines on Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, at 

2, 41 Fed. Reg. 20022 (“The analysis is informal and advisory in that it has not been formally reviewed or 

adopted by the Commission. Nor does anything here alter or amend either the Rule or the official

Statement of Basis and Purpose published with it.”). A press release announcing the results of the 

Commission’s review of auto credit transactions in 2011 contained a paragraph that assumed the Holder 

Rule incorporated both the $25,000 TILA ceiling and the amendment, effective July 2011, that increased 

this limit to $50,000. See https://www.ftc.gov/news-events/press-releases/2011/05/ftc-finds-broad-
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incorporated the $25,000 limit in TILA’s exemptions was not supported by the Holder Rule or 

canons of construction, and was contrary to the intent stated by the Commission when it adopted 

the Rule.

/S

Division of Financial Practices

 

compliance-among-auto-dealers-rule-protects. For the reasons stated above, the assumption in this 

release that the Holder Rule incorporates the TILA’s transaction limit was unfounded. Moreover, FTC 

staff opinions and court decisions examining the application of the Holder Rule to student loans have 

rejected the argument that modifications to TILA’s exemptions since 1975 – such as the exemption for 

federally-insured student loans – create exemptions from the Holder Rule. See Jackson v. Culinary 

School of Washington, 788 F. Supp. 1233, 1250-51 (D.D.C. 1992) (applying standard rules of statutory 

construction, definitional terms in the FTC Holder Rule do not change with subsequent amendments to 

TILA’s exemptions). Thus, the Holder Rule does not incorporate exemptions in the TILA’s section 104 

or amendments thereto.