Patrick Lafferty, et ux. v. Wells Fargo Bank, N.A.

In 1975 the FTC issued a regulation called the “Holder Rule,” codified at 16 Code of Federal Regulations section 433.2 that states in part: In connection with any sale or lease of goods or services to consumers, in or affecting commerce as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act for a seller, directly or indirectly, to: (a) Take or receive a consumer credit contract which fails to contain the following provision in at least ten point, bold face, type: 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. The case presents two questions:

1. Whether the “Holder Rule” as discerned by the California Third District Court of Appeal implies a new private cause of action?

2. Whether the “Holder Rule” cap as applied by the Third District Court of Appeal preempts the California Consumers Legal Remedies Act (Civil Code