The purchase of commercial paper issued in return for consumer goods [hereinafter referred to as consumer paper] is a common and wide-spread sales financing practice. Various judicial techniques and legislative schemes have been employed to disqualify purchasers of consumer paper from becoming holders in due course [hereinafter referred to as HDC], thus rendering these purchasers subject to defenses to the instrument based upon consumer dissatisfaction with the goods. Underlying the denial of HDC sttus to purchasers of consumer paper are the following premises: (1) the sale of consumer goods is not a commercial transaction and should not be governed by commercial law; (2) usually a close connection exists between sellers and consumer purchases financers; (3) there is a basic inequality between consumers and the commercial community; (4) the maintenance of consumer defenses against sellers alone is inadequate; and (5) the desired goals of minimizing costs of seller misconduct and internalizing the remaining costs in the price of consumer credit should be accomplished by allowing consumer defenses against purchasers financers.
Purchase of Consumer Paper and Subjection to Collateral Forces,
U. Rich. L. Rev.
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