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Abstract: 

The Federal Trade Commission’s Holder Rule was designed to protect consumers from being forced to repay credit obligations where the seller engaged in fraud or misconduct. By placing assignees in the same legal position as sellers for purposes of claims and defenses, the Rule prevents lenders and servicers from escaping liability when sellers acted wrongfully. In recent years, however, borrowers have advanced expansive interpretations of the Holder Rule that depart sharply from its text and purposes, nowhere more notably than in the student loan context. This article examines those emerging theories, including affirmative lawsuits seeking loan discharge, claims under unfair and deceptive acts and practices statutes, attempts to apply the Rule to refinance loans, and efforts to evade statutes of limitation. It also analyzes the ongoing dispute over the Rule’s recovery cap, especially regarding attorneys’ fees, and critiques the FTC’s 2022 Advisory Opinion reversing prior guidance. This article argues that courts should reject these expansive borrower theories, decline to defer to the FTC’s recent shift in interpretation, and enforce the Holder Rule consistent with its original, limited design.

Keywords: Holder Rule; Student Loans; Self-Declared Discharge; Consolidation and Refinanced Loans; In re Crisomia; Recovery Caps; Damages Limitations; Pulliam v. HNL Automotive, Inc.

Affiliations:  1: Stradley Ronon Stevens & Young, LLP; 2: Stradley.