When a contractor arranges the customer's loan: the FTC Holder Rule and the right to rescind a home-secured loan

This page reports what the official source says. It is not legal advice: ask the office named here. The sources are two federal regulations in the Electronic Code of Federal Regulations and one section of the United States Code, all read on October 9, 2026. Part 433 defines a consumer as a natural person who seeks or acquires goods or services for personal, family or household use. The sources say nothing about business customers, and they do not cover state rules. The Federal Trade Commission and the Consumer Financial Protection Bureau were not reached for their own guidance pages, so this page quotes only the rules.

The Holder Rule: Part 433

Part 433 of Title 16 is headed "Preservation of Consumers' Claims and Defenses". Section 433.1 defines the terms. A seller is a person who, in the ordinary course of business, sells or leases goods or services to consumers. A consumer is a natural person who seeks or acquires goods or services for personal, family or household use. A purchase money loan is a cash advance received by a consumer for a finance charge within the meaning of the Truth in Lending Act and Regulation Z, applied in whole or substantial part to a purchase of goods or services from a seller who refers consumers to the creditor or is affiliated with the creditor by common control, contract or business arrangement.

Section 433.2 makes it an unfair or deceptive act under Section 5 of the Federal Trade Commission Act for a seller, directly or indirectly, to do either of two things.

Take or receive a consumer credit contract that does not carry a prescribed notice in at least ten point, bold face type.
Accept the proceeds of a purchase money loan as full or partial payment for a sale or lease, unless the consumer credit contract made in connection with the loan carries the matching notice.

The notice says any holder of the contract is "subject to all claims and defenses" the debtor could assert against the seller of the goods or services, and that recovery by the debtor shall not exceed amounts paid by the debtor under the contract. The two forms differ only in whether the goods or services were obtained under the contract or with the proceeds of the loan. The eCFR page shows no changes to the part after January 3, 2017.

A loan secured on the home: Regulation Z section 1026.23

Section 1026.23 of Regulation Z, issued by the Consumer Financial Protection Bureau, covers a credit transaction in which a security interest is or will be kept or taken in a consumer's principal dwelling. The consumer whose ownership interest is subject to the security interest has the right to rescind, except for transactions listed in paragraph (f). The Truth in Lending Act says the same in 15 U.S.C. 1635(a): the obligor may rescind until midnight of the third business day after the transaction is completed or the required forms and disclosures are delivered, whichever is later.

Point	What section 1026.23 says
Period	Until midnight of the third business day following consummation, delivery of the rescission notice, or delivery of all material disclosures, whichever occurs last
If the notice or disclosures are not delivered	The right expires 3 years after consummation, on transfer of all of the consumer's interest in the property, or on its sale, whichever comes first
Notice	The creditor delivers two copies of a separate notice of the right to rescind to each consumer entitled to rescind, using the model form in appendix H of the part or a substantially similar notice
Work and money while the period runs	Unless the right is waived, no money is disbursed other than in escrow, no services are performed and no materials are delivered until the period has expired and the creditor is reasonably satisfied the consumer has not rescinded
Effect of rescinding	The security interest becomes void and the consumer is not liable for any amount, including any finance charge. Within 20 calendar days after receiving the notice, the creditor returns money or property given to anyone in connection with the transaction
Waiver	The consumer may modify or waive the right if the credit is needed to meet a bona fide personal financial emergency, by a dated written statement describing the emergency, signed by all consumers entitled to rescind. Printed forms for this purpose are prohibited

Exempt transactions

Paragraph (f) lists transactions where the right does not apply: a residential mortgage transaction; a refinancing or consolidation by the same creditor of credit already secured on the principal dwelling, to the extent the new amount financed does not exceed the unpaid balance and certain charges; a transaction in which a state agency is the creditor; certain later advances in a series; and a renewal of optional insurance premiums that is not a refinancing.

How this fits with other consumer rules

The two rules deal with different things. Part 433 is about a seller who arranges or accepts a consumer loan. Section 1026.23 is about the loan's security on a home, whoever arranged it. For the written terms a home improvement contract carries, see home improvement contract terms, and for sales made at the door see door to door sales and cooling off rules.