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ATTACHMENT D 

Federal Trade Commission Trade Regulation Rule 

Concerning Preservation of Consumers’ Claims and Defenses 

(Holder Rule), 16 C.F.R. Part 433 
Federal Trade Commission §433.l 

as music power or peak power, is rep­ accuracy of the representations to 

resented under this section, the max­ which this part applies: And provided 

imum percentage of total harmonic further, That such seller is without ac­ distortion (see §432.2(d) of this part) tual knowledge of the violation con­ may be disclosed only at such rated tained in said written certification. 

output: And provided further, 

(b) That all disclosures or representa­ PART 433-PRESERVATION OF tions made under this section are less 

conspicuously, and pro min en tly made CONSUMERS' CLAIMS AND DEthan the disclosures required in §432.2 FENSES 

of this part; and 

(c) The rating and testing methods or Sec. 

standards used in determining such 433.1 Definitions. 

representations are disclosed, and well 433.2 Preservation of consumers' claims and 

known and generally recognized by the defenses, unfair or deceptive acts or pracindustry at the time the representa­ tices. 

tions or disclosures are made, are nei­ 433.3 Exemption of sellers taking or receiving open end consumer credit contracts ther intended nor likely to deceive or before November 1, 1977 from require­ confuse the consumers and are not oth­ ments of §433.2(a). erwise likely to frustrate the purpose 

of this part. AUTHORITY: 38 Stat. 717, as amended; (15 

U.S.C. 41, et seq.) NOTE 1: For the purpose of paragraph (b) of 

this section, optional disclosures will not be § 433.1 Definitions. considered less prominent if they are either 

bold faced or are more than two-thirds the (a) Person. An individual, corporaheight of the disclosures required by § 432.2. tion, or any other business organiza­ NOTE 2: Use of the asterisk in effecting any tion. of the disclosures required by § 432.2 and permitted (b) Consumer. A natural person who by §432.4 shall not be deemed conspicuous disclosure. seeks or acquires goods or services for 

personal, family, or household use. [39 FR 15387, May 3, 1974; 39 FR 17838, May 21, (c) Creditor. A person who, in the or­ 1974] dinary course of business, lends pur­

§ 432.5 Prohibited disclosures. chase money or finances the sale of 

No goods or services to consumers on a de­ performance characteristics to 

which this part applies shall be rep­ ferred payment basis; Provided, such 

resented or disclosed if they are not ob­ person is not acting, for the purposes of 

tainable as represented or disclosed a particular transaction, in the capacwhen the equipment is operated by the ity of a credit card issuer. 

consumer in the usual and normal (d) Purchase money loan. A cash admanner without the use of extraneous vance which is received by a consumer 

aids. in return for a "Finance Charge" within the meaning of the Truth in Lending § 432.6 Liability for violation. Act and Regulation Z, which is applied, 

If the manufacturer or, in the case of in whole or substantial part, to a purforeign made products, the importer or chase of goods or services from a seller 

domestic sales representative of a for­ who (1) refers consumers to the credeign manufacturer, of any product cov­ itor or (2) is affiliated with the creditor 

ered by this part furnishes the informa­ by common control, contract, or busition required or permitted under this ness arrangement. part, then any other seller of the prod­ (e) Financing a sale. Extending credit 

uct shall not be deemed to be in viola­ to a consumer in connection with a tion of §432.5 of this part due to his re­ "Credit Sale" within the meaning of liance upon or transmittal of the writ­ the Truth in Lending Act and Regula­ ten representations of the manufac­ tion Z. turer or importer if such seller has 

(f) Contract. Any oral or written been furnished by the manufacturer, 

agreement, formal or informal, be­ importer, or sales representative a 

written certification attesting to the tween a creditor and a seller, which 

465 

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§433.2 16 CFR Ch. I (1-1-21 Edition) 

contemplates or provides for coopera­ eonnection with such purehase money 

tive or concerted activity in connec­ loan contains the following provision 

tion with the sale of goods or services in at least ten point, bold face, type: 

to consumers or the financing thereof. 

(g) Business arrangem.ent. Any under­ NOTICE 

standing, procedure. course of dealing, ANY HOLDER OF THIS CONSU1\1ER 

or arrangement, formal or informal. CREDIT CONTRACT IS SUBJECT TO ALL 

between a creditor and a seller, in con­ CLAE\!IS AND DEFENSES WHICH THE 

nection with the sale of goods or serv­ DEBTOR COULD ASSERT AGAINST THE 

ices to consumers or the financing SELLER OF GOODS OR SERVICES OBthereof. TAINED WITH THE PROCEEDS HEREOF. 

(h) Credit card issuer. A person who RECOVERY HEREUNDER BY THE DEBTOR 

extends to cardholders the right to use SHALL NOT EXCEED AMOUNTS PAID BY 

a credit card in connection with pur­ THE DEBTOR HEREl.:NDER. 

chases of goods or services. [40 FR 53506, Nov. 18, 1975; 40 FR 58131, Dec. 

(i) Consumer cred"it contract. Any in­ 15, 1975] 

strument which evidences or embodies 

a debt arising from a "Purchase Money § 433.3 Exemption of sellers taking or 

Loan" receiving open end consumer credit transaction or a "financed sale" 

contracts before November 1, 1977 as defined in paragraphs (d) and (e) of from requirements of§ 433.2(a). this section. 

(j) Seller. A person who, in the ordi­ (a) Any seller who has taken or renary course of business. sells or leases ceived an open end consumer credit 

goods or services to consumers. eontraet before November 1, 1977, shall 

be exempt from the requirements of 16 [40 FR 53506, Nov. 18, 1975] CFR part 433 with respect to sueh con­

§ 433.2 Preservation of consumers' traet provided the eontract does not 

claims and defenses, unfair or de­ eut off eonsmners' claims and defenses. 

ceptive acts or practices. (b) Definitions. The following definiIn connection with any sale or lease tions apply to this exemption: 

of goods or serviees to consumers. in or (1) All pertinent definitions conaffecting commerce as "commerce" is tained in 16 CFR 433.1. 

defined in the Federal Trade Commis­ (2) Open end consumer eredit con­ sion Act, it is an unfair or deceptive traet: a eonsumer eredit contraet puract or practice within the meaning of suant to which "open end credit" is ex­ section 5 of that Act for a seller, di­ tended. 

rectly or indirectly, to: (3) "Open end eredit": eonsumer ered­

(a) Take or receive a consumer eredit it extended on an aceount pursuant to 

contraet whieh fails to eontain the fol­ a plan under whieh a ereditor may per­ lowing provision in at least ten point. mit an applicant to make purchases or bold face, type: make loans. from time to time, diNOTICE rectly from the creditor or indireetly 

by use of a credit card, check, or other ANY HOLDER OF THIS CONSUMER 

CREDIT CONTRACT IS SUBJECT TO ALL device, as the plan may provide. The 

CLAIMS AND DEFENSES WHICH THE term does not include negotiated adDEBTOR COULD ASSERT AGAINST THE vanees under an open-end real estate 

SELLER OF GOODS OR SERVICES OB­ mortgage or a letter of credit. 

TAINED PURSUANT HERETO OR WITH (4J Contract which does not cut off THE PROCEEDS HEREOF. RECOVERY consumers' claims and defenses: A con­ HEREUNDER BY THE DEBTOR SHALL 

NOT EXCEED AMOUNTS PAID BY THE sumer credit contract whieh does not 

DEBTOR HEREUNDER. constitute or eontain a negotiable instrument, or eontain any waiver. limior, tation, term, or condition which has 

(b) Accept. as full or partial payment the effect of limiting a consumer's 

for such sale or lease, the proceeds of right to assert against any holder of 

any purehase 1noney loan ( as purehase the contract all legally sufficient 

money loan is defined herein), unless claims and defenses which the conany consumer credit contract made in sumer could assert against the seller of 

466 

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Federal Trade Commission §435.l 

goods or services purchased pursuant check, or money order; authorization 

to the contract. from the buyer to charge an existing 

charge account; or other payment [42 FR 19490, Apr. 14, 1977, as amended at 42 methods, the time at which the seller FR 46510, Sept. 16, 1977] receives both said payment and an 

PART 435-MAIL, INTERNET, OR order from the buyer containing all of 

the information needed by the seller to TELEPHONE ORDER MERCHANDISE process and ship the order. Provided, 

however, that where the seller receives 

Sec. notice that a payment by means other 435.1 Definitions. than cash or credit as tendered by the 435.2 Mail, Internet, or telephone order 

buyer has been dishonored or that the sales. 

435.3 Limited applicability. buyer does not qualify for a credit sale, 

receipt of a properly completed order shall AUTHORITY: 15 U.S.C. 57a. mean the time at which: 

SOURCE: 79 FR 55619, Sept. 17, 2014, unless (1) The seller receives notice that a otherwise noted. payment by means other than cash or 

credit in the proper amount tendered § 435.1 Definitions. by the buyer has been honored; For purposes of this part: (2) The buyer tenders cash in the 

(a) Mail, Internet, or telephone order proper amount; or sales shall mean sales in which the (3) The seller receives notice that the buyer has ordered merchandise from buyer qualifies for a credit sale. the seller by mail, via the Internet, or (d) Refund shall mean: by telephone, regardless of the method 

(1) Where the buyer tendered full of payment or the method used to so­ payment for the unshipped merchan­ licit the order. 

dise in the form of cash, check, or (b) Prompt refund shall mean: money order, a return of the amount (1) Where a refund is made pursuant tendered in the form of cash, check, or to paragraph (d)(l), (d)(2)(ii), (d)(2)(iii), 

money order sent to the buyer; or (d)(3) of this section, a refund sent 

(2) Where there is a credit sale: by any means at least as fast and reliable as first class mail within seven (7) (i) And the seller is a creditor, a copy 

working days of the date on which the of a credit memorandum or the like or 

buyer's right to refund vests under the an account statement sent to the buyer 

provisions of this part. Provided, how­ reflecting the removal or absence of 

ever, that where the seller cannot pro­ any remaining charge incurred as a revide a refund by the same method pay­ sult of the sale from the buyer's acment was tendered, prompt refund shall count; 

mean a refund sent in the form of cash, (ii) And a third party is the creditor, 

check, or money order, by any means an appropriate credit memorandum or 

at least as fast and reliable as first the like sent to the third party credclass mail, within seven (7) working itor which will remove the charge from 

days of the date on which the seller the buyer's account and a copy of the 

discovers it cannot provide a refund by credit memorandum or the like sent to 

the same method as payment was ten­ the buyer that includes the date that 

dered; the seller sent the credit memorandum 

(2) Where a refund is made pursuant or the like to the third party creditor 

to paragraph (d)(2)(i) of this section, a and the amount of the charge to be rerefund sent by any means at least as moved, or a statement from the seller 

fast and reliable as first class mail acknowledging the cancellation of the 

within one (1) billing cycle from the order and representing that it has not 

date on which the buyer's right to re­ taken any action regarding the order 

fund vests under the provisions of this which will result in a charge to the 

part. buyer's account with the third party; 

(c) Receipt of a properly completed (iii) And the buyer tendered partial 

order shall mean, where the buyer payment for the unshipped merchantenders full or partial payment in the dise in the form of cash, check, or 

proper amount in the form of cash, money order, a return of the amount 

467 

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