Here is How the Holder Rule Works When You Have a Putrid Loan

Recently I wrote Will the Holder Rule Help Me With My Student Loan Debt? and most people are unaware how the Holder Rule may apply if you purchased financed services from one entity and financed it with another. I think this has some big potential in student loan defense but that will have to be developed.

Attorney Nathan DeLadurantey from Wisconsin has had experience in using the Holder Rule, or the Wisconsin version of it when assisting consumers.

Here is what Nathan offered to help explain the Holder Rule.

“What happens if you get sweet-talked into a loan or transaction – and were lied to as part of that transaction? For example, someone convinces you to enter into a student loan and they falsely inflate your income to lend you more than you can afford? Or, they sneak in a bunch of one-sided terms that violate your rights under Wisconsin law?

After people have been defrauded by a company that lent them money – they quickly realize the loan has been transferred to a different company.

Let’s call the original company “Fraudulent Lender” and the second company “Clueless Company.”

The legal question that surfaces is this: can Clueless Company be held responsible for the actions of Fraudulent Lender? The good news is that in Wisconsin (the general rule) is yes, Clueless Company can be held responsible for the original actions of Fraudulent Lender. Wis. Stat. 422.407(1) (With respect to a consumer credit transaction…an assignee of the rights of a creditor is subject to all claims and defenses of the customer against the assignor arising out of the transaction…).

This happens because Clueless Company “steps into the shoes” of the original lender. I like this phrase, because it paints the picture of what’s going on: Clueless Company is literally standing in the place of the original Fraudulent Lender.

In legal jargon, we call the second company the “holder” or “assignee” of the original loan. So you’re not out of luck just because you took out a loan with a company that transferred it to someone else. If the original lender violated your rights under the Wisconsin Consumer Act, you may be able to sue the new company that’s collecting from you.

Like all laws, the provisions that let you go after Clueless Corporation certainly have a few loopholes. But pick up your phone (or go online) and call a consumer lawyer for a free consultation.

And don’t get too worried about how much hiring a lawyer may cost. The Wisconsin Consumer Act that protects you, also helps pay for your lawyer by shifting their fees to the company that ripped you off. Until consumers stand up to and enforce their rights, fraudulent lenders will always see what they can get away with.”

So there you go, some great advice from Nathan DeLadurantey to help explain or demystify the Holder Rule and the specific corresponding statute in Wisconsin.

If you don’t live in Wisconsin then you should talk to a consumer attorney who is licensed in your state to discover what specific similar law you may have and how they can help you. Just keep in mind you may have to specifically ask about the Holder Rule since it may not be on the radar of someone who does not use it much in representing consumers.

Steve Rhode
Get Out of Debt GuyTwitter, Facebook

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.