League System Calls for Indirect Lending Relief

The League System is urging the Federal Trade Commission (FTC) to withdraw a policy statement it says has caused confusion and harmed lenders. America's Credit Unions, the American Association of Credit Union Leagues, and all 31 Leagues expressed their concerns in a letter.

The FTC's 1975 Holder Rule requires consumer credit contracts to preserve borrowers' rights to raise claims against lenders. A 2022 FTC statement said attorneys' fees allowed under state laws are not capped, a position that appears to conflict with the rule's text.

The groups argue this change increases lenders' liability, sometimes beyond the loan amount, raising credit costs and limiting access for consumers. They contend it shifts the rule's intent from holding sellers accountable to targeting lenders when sellers fail.

They also call for reconsidering a 2021 staff note that reversed a longstanding position that the Holder Rule did not apply to transactions under $50,000. The proposed changes would align with broader deregulatory efforts of the administration.