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What Is the Holder Rule and How Does It Protect Consumers?
If you've ever financed a purchase, such as solar panels, and faced issues with the seller not fulfilling their promises, you might have heard of the Holder Rule. Created to protect consumers from fraudulent practices, this rule can be a powerful tool when dealing with dishonest sellers and lenders. Here’s everything you need to know about the Holder Rule, its history, and how it applies to your rights as a consumer.
The Origin of the Holder Rule
The Holder Rule was established by the Federal Trade Commission (FTC) in 1976 to address rampant consumer fraud. At the time, unethical sales practices were widespread. A notable example is the aluminum siding scams depicted in the 1980s movie Tin Men, where salespeople would sell siding, secure financing from lenders, and then vanish without completing the job.
In response, the FTC introduced the Holder Rule, ensuring that sellers could no longer separate their duty to perform from the buyer's obligation to pay. This means that lenders who finance these purchases are just as accountable for the seller’s misconduct as the seller themselves.
What Does the Holder Rule Say?
Under the Holder Rule, any lender that holds a consumer credit contract is subject to all claims and defenses that the consumer could assert against the seller. Simply put, if the seller fails to deliver what was promised, the consumer can pursue their claim against the lender, who financed the purchase.
For example, if your solar panel installer goes out of business and fails to honor the promised warranty, you can assert the same breach of contract claim against your lender.
Why the Holder Rule Matters
The FTC recognized that lenders are in a better position to monitor sellers since they control the financing. By holding lenders responsible, the Holder Rule encourages them to ensure sellers are honest and reliable. Moreover, it ensures that the burden of fraudulent practices falls on the lender—not the consumer.
This legal framework creates a layer of protection for consumers, preventing them from being stuck with loans for incomplete or poorly executed services.
How Does the Holder Rule Work for Consumers?
Here’s how the Holder Rule benefits consumers:
Claims Against the Lender
If the seller doesn’t deliver on their promises, you can file the same claims and defenses against the lender. This includes issues like fraud, misrepresentation, or breach of contract.
Limits on Recovery
While the Holder Rule is powerful, it does have limits. You can recover:
Up to the total amount you’ve already paid toward the loan.
Cancellation of the remaining loan balance.
Attorney’s Fees
Recent updates to the Holder Rule allow consumers to recover attorney’s fees, ensuring they are made whole after legal proceedings.
Real-Life Application: Solar Panel Lawsuits
In recent years, the Holder Rule has become a key legal tool for homeowners dealing with solar panel companies that fail to deliver on their warranties. When a company sells a 25-year warranty and goes out of business within a few years, consumers are left with defective or incomplete systems—and significant loan payments. The Holder Rule empowers these homeowners to take legal action against the lenders who financed the purchase.
What Can You Recover?
If you file a claim under the Holder Rule, you may be entitled to:
A full refund of any payments made on the loan
Cancellation of the remaining loan balance.
Reimbursement of attorney’s fees, ensuring you don’t bear the cost of pursuing justice.
Why the Holder Rule Is a Win for Consumers
The Holder Rule represents a significant win for consumer rights. It ensures that financial institutions share accountability for the misconduct of sellers, offering consumers a fair chance to recover their losses. At its core, the rule shifts the financial burden of unethical practices from innocent buyers to lenders, who are better equipped to monitor and mitigate risks.
Need Help? We’re Here to Represent You
If you’re facing issues with a solar panel loan or any other financed purchase where the seller failed to deliver on their promises, the Holder Rule could be your key to justice. Our team specializes in leveraging this rule to hold lenders accountable, ensuring you don’t carry the financial burden of someone else’s wrongdoing.
Contact us today to learn more about how we can help protect your rights and ensure you get the compensation you deserve.
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I felt completely stuck when Encor went out of business, leaving me with an unfinished solar system that didn’t work, failed inspections, and a loan I still had to pay. On top of that, they misled me about tax credits and savings, and I ended up paying more in taxes and insurance instead. Prevost Law Firm stepped in and took care of everything. Their team handled my case with professionalism and compassion, and I’m so grateful for the outcome. If you're struggling with solar issues, you need to call them. (Cara J.)
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My experience with Encor Solar was a disaster. They installed a system that didn’t work, used an unlicensed subcontractor, voided my roof warranty, and lied about the need for batteries during power outages. When they went out of business, they left me with an unfinished system and no way to fix the mess they created. Prevost Law Firm was amazing—taking on my case and delivering results that exceeded my expectations. They are true advocates for homeowners, and I’m so grateful for their help. If you're facing a similar situation, I can’t recommend them enough! (John S.)
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We can’t thank Prevost Law Firm enough for what they’ve done for us. My wife and I felt utterly defeated and trapped by the $73,590 loan for a solar panel system that never even worked. Encor, the installer, went out of business before the system passed inspection, but Solar Mosaic still demanded we pay for it. As disabled homeowners, we felt taken advantage of and didn’t know where to turn.
From the first phone call, their team made us feel like we weren’t alone in this fight. They listened to our story, fought tirelessly on our behalf, and never gave up until they got results. Thanks to them, our $73,590 loan was completely canceled, and we were refunded every single dollar of the $28,493 we had already paid into the loan. Best of all, we got to keep the solar panels for free!
When we got the news, we were overwhelmed with relief and gratitude. My stroke has already made life challenging enough, and this financial nightmare had only added more stress. Now, thanks to Prevost Law Firm, we can breathe again and finally focus on getting the panels working for us.
To anyone dealing with a solar panel loan disaster: don’t wait—call Prevost Law Firm. They are incredible, and they truly fight for people like us. We are so grateful we found them, and we hope others in similar situations will reach out for their help.
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Nothing herein is intended, and does not, create an attorney client relationship and is for informational purposes only. The Prevost law firm is licensed in Texas and is licensed to practice law in all Texas state courts and in multiple Federal Courts and Arbitration in 46 states. Solar sales are governed by both state and federal law. The attorney client relationship will only be created after the parties enter into a signed letter of representation.