The FTC Holder Rule
and your solar loan.

What the Holder Rule says

The FTC’s Holder Rule is formally the Trade Regulation Rule Concerning Preservation of Consumers’ Claims and Defenses, at 16 CFR Part 433. It was written to stop a specific trap: a seller makes promises, arranges the financing, and then the lender insists it owes you nothing because it did not make the promises.

The rule works through a notice that must appear in your credit contract in at least ten-point bold type. The notice begins with these words:

“ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND DEFENSES”

It goes on to say the holder is subject to the claims and defenses you could raise against the seller of the goods or services, and that your recovery under the notice cannot exceed the amounts you paid. “Holder” means whoever owns the loan, including a company that bought it later.

In plain terms: if the installer misrepresented the system, breached the contract, or never finished the job, the notice may let you raise those same problems against the lender.

When the rule applies

The rule is aimed at sellers, not lenders. It makes it an unfair or deceptive practice for a seller to do either of two things:

• Take a credit contract without the notice. This covers a “credit sale,” where the seller itself extends the credit, often then assigning the contract to a finance company.
• Accept the proceeds of a purchase money loan without the notice. A purchase money loan is a loan used wholly or substantially to buy from a seller who refers customers to the lender, or who is affiliated with the lender by common control, contract, or business arrangement.

The rule defines “business arrangement” broadly, to include any formal or informal understanding, procedure, or course of dealing between the lender and seller. That matters for solar. The CFPB has described solar loans as often made through point-of-sale partnerships with installers, with loan offers delivered alongside the installation contract on a tablet.

The rule protects consumers buying for personal, family, or household use. In 2021, FTC staff said the rule has no dollar ceiling, rejecting an older 1976 staff guideline that had borrowed Truth in Lending’s exemption for large transactions. That matters because many solar loans are large.

What claims and defenses carry over

The notice covers all claims and defenses you could assert against the seller. That can include misrepresentation and breach of contract. For a solar buyer, that might include:

• A system that was promised to cover your bill but was sized far too small.
• A salesperson who misstated the payment, the tax credit, or the loan terms.
• An installation that was never finished, never connected, or damaged your roof.
• Violations of your state’s consumer protection or home solicitation laws.

The notice gives you two kinds of protection. As a defense, you may raise the seller’s misconduct if the lender tries to collect. As a claim, you may seek money back from the lender. In 2019, the FTC restated its 2012 advisory opinion that the rule’s remedies are not limited to cases where rescission is warranted or the goods are worthless.

The notice does not prove your claim. You still have to show the installer did something wrong under the law that applies, and the lender can contest it.

The cap: amounts you have paid

Recovery under the notice “shall not exceed amounts paid” by you under the contract.

The FTC has narrowed what the cap covers. In a January 2022 advisory opinion, the Commission said:

• The cap applies only to recovery based on the notice, meaning claims you could bring against the seller.
• It does not cap recovery against the lender under other laws, such as a state law that makes the lender directly liable.
• It does not stop a state law from awarding attorney’s fees and costs against the lender, and it does not limit injunctive relief.

State laws that go further

The FTC has said its rule does not eliminate consumers’ rights under state law. Some states have their own versions. Two examples:

• California. Civil Code Section 1459.5 lets a plaintiff who wins a Holder Rule claim recover attorney’s fees, costs, and expenses from the holder as if the claim had been won against the seller. A waiver of that right is void.
• Massachusetts. General Laws chapter 255, Section 12F, makes a lender in a consumer loan subject to the borrower’s defenses against the seller if the lender knowingly participated in or was directly connected with the sale. The statute deems that true in listed situations, such as when the seller prepared the loan documents, when the lender supplied the forms used to get the loan, or when the seller specifically recommended the lender and the lender made two or more loans for that seller’s sales in a year.

Your state may have its own rules. Check our state solar laws page and ask a local consumer attorney what applies to you.

How to check your loan documents

1. Get the complete loan agreement. Not just the summary or the welcome email. If you do not have it, ask the lender or servicer in writing for a full copy of the signed agreement and any assignment. Our servicer lookup can help you find who holds it.
2. Search for the notice. Look for bold, all-capital text beginning “ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT.” It is often near the signature page or in a section titled notices. In a PDF, search for the word “holder.”
3. Note how the loan was made. Did the salesperson start the application? Was the installer named in the loan documents? Was the money paid directly to the installer? Did the loan include a dealer fee? These facts help show a business arrangement. See solar dealer fees.
4. Collect your proof of the seller’s misconduct. Proposals, savings estimates, texts, emails, and photos of unfinished work.
5. Total what you have paid. Download your payment history. That number matters for the cap.

If the notice is missing

A seller that takes a covered contract, or accepts covered loan proceeds, without the notice violates the rule. The FDIC’s exam manual tells banks that making purchase money loans requires the notice, and warns that a bank accepting consumer paper without it may be treated as a participant in the seller’s violation.

A missing notice does not automatically end the question, though. Whether you can still raise the installer’s misconduct against the lender then depends on state law and the facts. This is a point to take to an attorney.

What to say to the lender

A clear, factual letter helps you whether the lender settles, a regulator reviews your complaint, or an attorney takes the case later. Send it to the lender’s or servicer’s written dispute address by certified mail, and keep a copy. Include:

• Who you are. Your name, property address, and loan number.
• The notice. That your loan contract contains the FTC Holder Rule notice, with the page number, and that the holder is subject to the claims and defenses you could raise against the installer.
• What the installer did. Dates, names, what was promised, and what actually happened. Attach copies, not originals.
• What you have paid. Your total payments to date, from your payment history.
• What you want. For example, a refund of amounts paid, a reduced balance, or the lender’s help getting the work finished.

Do not admit anything you are unsure of, and do not threaten to stop paying. If the lender holds the loan through a servicer, send copies to both. If your loan was sold, the notice still applies, because it binds any holder of the contract.

What to do next

• Keep paying while you dispute, unless an attorney advises otherwise. Missed payments can bring late fees, credit damage, collections, and possibly a lawsuit. A strong Holder Rule defense does not stop the lender from reporting missed payments.
• Put the dispute in writing. Write to the lender, describe what the installer did, say that your contract contains the holder notice, and ask the lender to address the claims. Keep it factual. Our complaint letter builder can help.
• File complaints. File with the CFPB and your state attorney general. See our complaint guide.
• Talk to a consumer attorney. Holder Rule claims turn on your documents and state law. Read do you need a solar lawyer.
• If the installer is gone, this rule is often the most important tool you have. See solar company out of business.

Related guides

• How to get out of a solar loan
• Solar company went out of business?
• Misled by a solar salesperson?
• Solar dealer fees
• Complaint letter builder