Federal regulation prohibits a credit seller or lender from obtaining a nonpossessory security interest in household goods if the interest is not a purchase money security interest.

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This is true. The Federal Trade Commission's Regulation Z prohibits creditors from obtaining a nonpossessory security interest in household goods unless it is a purchase money security interest (i.e. the credit was used to purchase the goods). This is meant to protect consumers from losing their household items if they default on a loan that was not used to purchase those items.

Federal Regulation Prohibits a Credit Seller or Lender from Obtaining