Susan purchased a refrigerator from ABC Appliance store for $800.She takes the refrigerator home and discovers that it is defective.She calls ABC Appliance store and tells them that she would like to return the refrigerator.ABC Appliance store tells her that they have assigned the promissory note she provided the store in order to purchase the refrigerator to a finance company and that the finance company,as a holder in due course,is not subject to defenses.Which of the following is true regarding the rights of parties?
A) The finance company is subject to the defenses of Susan because of the Federal Trade Commission rule created to protect consumers.
B) ABC Appliance store is correct in that Susan cannot assert her defenses against the finance company.
C) Susan can assert her defenses against the finance company only if she can prove that the finance company had knowledge that ABC Appliance store sold defective equipment from time to time.
D) Susan can assert her defenses against the finance company only because she gave notice of the problem within 5 days of the sale.
E) Susan can assert her defenses against the finance company only if she agrees to arbitrate the dispute.

Question

Quizplus · Accepted Answer

The FTC created several rules in the 1970s that help protect consumers against abuse. These rules require every consumer credit contract or any purchase money loan to contain the following statement in 10pt, boldface type:"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." Consequently, no subsequent holder of the contract will have the rights of an HDC.

Susan Purchased a Refrigerator from ABC Appliance Store for $800