California Appellate Tracker

Lafferty v. Wells Fargo Bank, N.A.

August 15, 2018

The Federal Trade Commission’s Holder Rule limits a creditor’s liability for claims by restricting the debtor’s total recovery (including attorney fees) to the amount paid by the debtor under the assigned contract.

The FTC Holder Rule’s second sentence limits the creditor’s liability for claims against the seller which can be brought against the creditor under the Holder Rule’s first sentence. The limitation applies to any “recovery” under the Holder Rule. Recovery is a broad term, including not only damages but also attorney fees. The second sentence limits the debtor’s total “recovery” (including attorney fees) under the Holder Rule to the amount paid by the debtor under the assigned contract. However, the debtor may recover court costs and prejudgment interest in addition to amounts paid under the contract. Amounts paid under the contract do not include debt forgiveness or amounts the creditor receives on reselling the collateral. Recovery under the Holder Rule is a separate cause of action from the underlying claim against the seller so that the CLRA’s attorney fee clause, for example, does not apply to or permit the award of fees against the creditor on a CLRA claim against the seller that the debtor may bring against the creditor under the Holder Rule.

California Court of Appeal, Third District (Hoch, J.); July 19, 2018; 2018 Cal. App. LEXIS 643

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Lafferty v. Wells Fargo Bank, N.A.

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