UNITED STATES OF AMERICA 

FEDERAL TRADE COMMISSION 

WASHINGTON, D.C. 20580 

Office of the Secretary 

January 18, 2022 

Commission Statement on the Holder Rule and Attorneys’ Fees and Costs 

This advisory opinion addresses the Federal Trade Commission’s Trade Regulation Rule 

Concerning Preservation of Consumers’ Claims and Defenses, 16 C.F.R. § 433.2, commonly 

known as the Holder Rule, and its impact on consumers’ ability to recover costs and attorneys’ 

fees. This issue has arisen repeatedly in court cases, with some courts correctly concluding that 

the Holder Rule does not limit recovery of attorneys’ fees and costs when state law authorizes 

awards against a holder,

1 and others misinterpreting the Holder Rule as a limitation on the 

application of state cost-shifting laws to holders.2 

Background on the Rule. The Commission adopted the Holder Rule to protect consumers 

when they purchase goods or services on credit. The Commission identified multiple practices 

that sellers use to “cut off” consumers’ rights so that the holder of the loan may demand full 

payment from the consumer despite misconduct by the seller.3 The Commission determined that 

1 See, e.g., In re Stewart, 93 B.R. 878 (Bankr. E.D. Pa. 1988); Home Sav. Ass’n v. Guerra, 733 

S.W.2d 134 (Tex. 1987); Kish v. Van Note, 692 S.W.2d 463 (Tex. 1985); Reliance Mortg. Co. v. 

Hill-Shields, No. 05-99-01615-CV, 2001 Tex. App. LEXIS 140 (Tex. App. Jan. 10, 2001); 

Oxford Fin. Cos. v. Velez, 807 S.W.2d 460 (Tex. App. 1991); Green Tree Acceptance, Inc. v. 

Pierce, 768 S.W.2d 416 (Tex. App. 1989); see also Pulliam v. HNL Auto. Inc., 60 Cal. App. 5th 

396, 274 Cal. Rptr. 3d 547, 559-67 (Cal. Ct. App. 2021), review granted, 484 P.3d 564, 277 Cal. 

Rptr. 3d 323 (Cal. Apr. 28, 2021) (No. S267576) (concluding that Holder Rule does not limit 

attorney fee recovery from holder; rejecting contrary position attributed to FTC and ruling that 

such an agency interpretation would not be entitled to deference). 

2 See, e.g., Spikener v. Ally Fin., Inc., 50 Cal. App. 5th 151, 162, 263 Cal. Rptr. 3d 726, 735 (Cal. 

Ct. App. 2020) (concluding statements by the Commission in 2019 (84 Fed. Reg. 18,711, 18,713 

(May 2, 2019)) demonstrate “clear intent” to preempt attorney fee recovery “regardless of 

whether state claim being asserted pursuant to the Holder Rule contains fee-shifting provisions”, 

but declining to express opinion on whether costs are preempted for the same reason); Order on 

Motion, Reyes v. Beneficial State Bank, No. BCV-17-100082 (Cal. Sup. Ct., Kern Co., Dec. 5, 

2019), appeal docketed, No. F080827 (Cal. Ct. App. Feb. 13, 2020) (ruling state statute is 

preempted by Commission statements on application of Holder Rule to attorney’s fees); see also 

Lafferty v. Wells Fargo Bank, NA, 25 Cal. App. 5th 398, 414-16, 275 Cal. Rptr. 3d 842, 855-57 

(Cal. Ct. App. 2018) (concluding that second sentence of the Holder Rule Notice caps attorneys’ 

fees claim against defendant-holder unless “another state or local cause of action can be found to 

support such a claim,” but that costs are not subject to the same cap). 

3 See 40 Fed. Reg. 53,506, 53,507-08 (1975) (use of promissory notes and waiver of defense 

clauses in seller-financed sales); Id. at 53,514-15 (use of “vendor-related” or “direct” loans by 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

sellers’ use of these practices to foreclose consumer claims and defenses constitutes an unfair 

practice under Section 5 of the FTC Act.4 To preserve consumers’ claims and defenses, the 

Holder Rule requires a seller that finances sales to include in credit contracts the following 

provision, also known as the “Holder Rule 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. 

16 C.F.R. § 433.2(a). Where the seller is not the creditor, but receives payment from the 

proceeds of a loan by a creditor that has a referral or business relationship with the seller 

(defined in the Rule as a “Purchase Money Loan”), the consumer credit contract must have the 

same provision, except the words “PURSUANT HERETO OR” are omitted. Id. § 433.2(b). A 

creditor or assignee of credit contracts with the Holder Rule Notice is thus subject to any claims 

or defenses that the consumer could assert against the seller. 

Analysis. The Holder Rule does not eliminate any rights the consumer may have as a 

matter of separate state, local, or federal law. Consequently, whether costs and attorneys’ fees 

may be awarded against the holder of the credit contract is determined by the relevant law 

governing costs and fees.5 Nothing in the Holder Rule states that application of such laws to 

holders is inconsistent with Section 5 of the FTC Act or that holders should be wholly or 

partially exempt from these laws. 

third party) (1975); see also FTC, Statement of Enforcement Policy, 41 Fed. Reg. 34,594, 34,596 

(1976). (explaining affiliation and referral standards applicable to “transactions in which a seller 

accepts the proceeds of a loan extended directly from a lender to a purchaser.”). 

4 40 Fed. Reg. at 53,523. 

5 States have passed varying laws regarding recovery of attorneys’ fees and costs under which 

responsibility to pay fees may depend a variety of factors. Compare ALASKA R. CIV. P. 82(a) 

(2021) (“Except as otherwise agreed to by the parties, the prevailing party in a civil case shall be 

awarded attorney’s fees calculated under this rule”); WASH. REV. CODE § 4.84.330 (2021) (if a 

contract provides for fees to one party, the prevailing party is entitled to fees); KY. REV. STAT. 

Ann. § 367.220(1) (West 2015) (court may award attorneys’ fees and costs to prevailing party in 

any action under Kentucky Consumer Protection Act), with WASH. REV. CODE § 4.84.185 (court 

may award fees incurred in opposing claims or defenses that court finds were “frivolous and 

advanced without reasonable cause”); COLO. REV. STAT. § 6-1-113(2)(b) (2021) (in successful 

action to enforce liability, “person who is found to have engaged or caused another to engage in” 

deceptive trade practice is liable for costs and attorney fees). 

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Further, if the applicable law requires or allows costs or attorneys’ fee awards against a 

holder, the Holder Rule does not impose a cap on such an award. The sentence in the Holder 

Rule Notice that limits recovery to “amounts paid by the debtor” applies only to monetary 

recovery against holders based on the Holder Rule Notice (i.e., recovery on the claims or 

defenses the debtor could assert against the seller); the Rule places no cap on a consumer’s right 

to recover from the holder for other reasons. Thus, for example, in an action between a 

consumer and a holder, if the applicable law authorizes the consumer to recover costs or fees 

from parties that unsuccessfully oppose the consumer’s claims or defenses, a prevailing 

consumer’s right to recovery against the holder is not restricted by the Holder Rule Notice. In 

this scenario, the cost or fee award is separate and supported by a law that is independent of the 

Holder Rule. Thus, the Holder Rule Notice does not limit costs or attorneys’ fees that the 

applicable law directs or permits a court to award against a holder because of its role in litigation. 

In a situation where the applicable law permits assessing costs or attorneys’ fees 

exclusively against the seller, the seller’s liability for such costs and fees may be raised against 

the holder because of the Holder Rule Notice. The holder’s obligation to pay costs or fee awards 

available exclusively against the seller, however, would be limited to the amount paid by the 

consumer. Thus, for example, if a consumer is awarded fees in a suit solely against the seller, or 

the law allows awards only against a seller that has engaged in specified conduct, the Holder 

Rule Notice authorizes the consumer to recover such an award from the holder up to the amount 

paid. The consumer also may rely on a claim against the seller for costs or attorneys’ fees to 

offset an obligation to the holder. 

Some courts have read the Commission’s statements in a 2019 Rule Confirmation notice 

regarding the Holder Rule as mandating a different result.

6 Insofar as these decisions conclude 

that the Holder Rule precludes state law from providing for costs or attorneys’ fees against the 

holder, they misconstrue the Commission’s statements. Neither the Rule itself nor the 2019 Rule 

Confirmation notice say that the Holder Rule invalidates state law or that there is a federal 

interest in limiting state remedies. To the contrary, the 2019 Rule Confirmation says that 

nothing in the Holder Rule limits recovery of attorneys’ fees if a federal or state law separately 

6 Supra note 2. 

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provides for recovery of attorneys’ fees independent of claims or defenses arising from the 

seller’s misconduct.7 

By direction of the Commission. 

April J. Tabor 

Secretary 

7

 We have previously observed that the Holder Rule Notice does not limit the availability of 

injunctive relief against a holder: “The final sentence of the Holder Rule Notice does not restrict 

the types of remedies available when a claim or defense is preserved; it simply states that the 

money that a consumer may obtain from a holder based on the Notice may not exceed amounts 

paid. The Commission affirms that the plain language of the Rule does not limit the types of 

relief a court may award against a holder.” 84 Fed. Reg. at 18,713 n.32. 

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