Under rules created by the FTC in the 1970s:
A) Finance companies that have purchased negotiable installment notes from a seller are not subject to the claims and defenses that a debtor could assert against the seller, and therefore have all the rights of an HDC.
B) Finance companies that have purchased negotiable installment notes from a seller are subject to the same claims and defenses that a debtor could assert against the seller, and do not have the rights of an HDC.
C) A subsequent holder who knows a check was dishonored when he purchased it may not receive payment under the Shelter Principle.
D) A subsequent holder may not receive payment on a check that was dishonored even if he was not aware it was dishonored when he purchased it.
E) Finance companies may avoid a debtor's claims and defenses if they can prove they and the transferor company were not closely connected and they had no knowledge of the seller's promises.

Question

Quizplus · Accepted Answer

Under the rules created by the FTC in the 1970s, finance companies that have purchased negotiable installment notes from a seller are subject to the same claims and defenses that a debtor could assert against the seller. This means they do not have the rights of a holder in due course (HDC), which would otherwise allow them to be free from such claims and defenses. This rule was established to protect consumers from unfair practices.

Under Rules Created by the FTC in the 1970s