Today’s published opinion, Patrick Lafferty v. Wells Fargo, from California Court of Appeal, Third Appellate District, represents a major victory for consumers of lemon cars sold by deadbeat dealers.
Among several issues on appeal was the question of whether a car buyer can assert lemon law claims against a bank based on the “Holder Rule.” The Holder Rule is a commonly used term that describes the Code of Federal Regulations title 16, section 433.2 requirement that every consumer installment sale contract that is assigned to a lender provide the following language in 10-point (or larger) bold typeface:
NOTICE: 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.
In answer to that question, the Court held that the plain language of the Holder Rule allows a car buyer to assert all claims against the bank that they might otherwise have against seller of the car.
Why should you care? If you purchased a car from an out of business dealer, you may still have protections under the lemon law because your lender may be required to buy-back your lemon.
If you think that you purchased or leased a lemon, give me a call.