Advisory opinion letter to Mr. Pohanka

Ass t Dir. - Gov t Affairs ,

ADVISORY OPINIONS 1465

Clarification of definition of "business arrangement" in Trade Regulation Rule Concerning Preservation of Consumers Claims and Defense. (File No. 763 7007, release June 18, 1976)

Opnwn Letter
May 28, 1976
Dear Mr. Pohanka:

This is in response to your letter of May 21, 1976 requesting an Advisory Opinion.

In your letter you asked the Commission to clarify whether the ongoing procedure between a seller and lender in order to perfect a lien constitutes a " business arrangement" for purposes of the Trade Regulation Rule Preservation of Consumers' Claims and Defenses. The Commission, in requiring the notice in certain direct loans, was intending to reach those relationships where the seller is arranging credit, through either an established pattern of referrals or an affiliation.

The perfection of a security intcrest is a pro forma procedure performed by a seller whether he arranges credit for the consumer or the consumer arranges credit for himself. When a seller is helping a creditor perfect his security interest, whether by a recording of the lien on the title or any other method, this activity alone does not constitute arranging credit.

The Commission does not regard such activity, absent an established pattern of referrals or some other affiliation with the creditor, to be a business arrangement" or form of creditor affiliation within the meaning of the Rule. Nor would the extent or frequency of such activity, standing alone, bring the conduct within the definition of purchase money loan " under the Rule.

By direction of the Commission.

LetteT of Request