FTC Holder Rule Explained — The Federal Law That Makes Your Solar Lender Pay

Most homeowners who got cheated by a solar company assume they have to chase the installer to get their money back. That assumption is wrong. And it costs people their cases.

The most powerful legal tool in residential solar — the one that has produced more loan cancellations and dollar recoveries than any other single mechanism — is a 49-year-old Federal Trade Commission regulation that almost nobody outside consumer protection law has heard of. It is called the Holder Rule, codified at 16 C.F.R. § 433.2. It says, in language that has been on every consumer credit contract since 1976, that your lender is liable for your installer's fraud.

Not metaphorically. Not theoretically. Legally — under federal regulation that the FTC's own description calls "the most effective action the FTC has ever taken to prevent and remedy consumer fraud."

If you have a solar loan funded by GoodLeap, Mosaic, Sunlight Financial, Dividend, Service Finance, or any of the dozen other solar-specialized lenders — stick with me. I'll walk you through exactly what the Holder Rule says, exactly how it applies to your loan, exactly what the lenders are arguing in defense, and exactly how to use it to either cancel your loan entirely or force a settlement that reduces your principal dramatically.

What the Holder Rule Actually Says

The required notice is brief. It must appear in at least 10-point bold-face type on every consumer credit contract that funds a purchase of consumer goods or services. The exact language, taken from 16 C.F.R. § 433.2:

"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 WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."

Three things this language does:

1. "Any holder ... is subject to all claims and defenses." Translation: whoever owns your loan now — even if it has been sold or assigned to a different lender after origination — inherits everything you could have argued against the original installer. If Sunrun's salesperson lied to you, you can assert that lie against GoodLeap. If Freedom Forever failed to deliver a working system, you can assert that failure against Mosaic. The lender does not get to claim "I was a neutral third party, take it up with the installer."

This is a fundamental break from how commercial law normally works. In most contexts, when a debt is sold to a third party, the third party is a "holder in due course" who buys the debt free of the original obligor's claims. The Holder Rule abolishes that protection for consumer credit. The whole point is that consumer-credit financing arrangements between sellers and lenders are not arms-length — they are coordinated schemes — so the law refuses to let lenders hide behind the legal fiction that they did not know what was going on.

2. "Recovery hereunder by the debtor shall not exceed amounts paid by the debtor hereunder." Translation: the most you can recover from the lender is what you have actually paid them. If you have paid $8,000 on a $50,000 loan, your maximum cash recovery is $8,000 — but importantly, the remaining $42,000 balance is also subject to attack. In practice, the recovery cap is rarely the binding constraint. The bigger value is in canceling future payments and clearing the loan from your credit.

3. The notice has to be there. The Holder Rule requires the seller (the installer) to ensure that the lender's contract includes the notice. In practice, almost every solar loan from GoodLeap, Mosaic, Sunlight, Dividend, and Service Finance contains the notice — they include it specifically to comply with the rule and to enable the secondary loan market. Pull your loan documents. Look for the bold notice. It is almost certainly there.

Why the Holder Rule Was Written

This part matters because lenders' defenses ignore it.

Before 1975, the standard practice in consumer credit went like this: a fraudulent seller would sell faulty goods or services on credit. The seller would immediately assign that credit contract to a creditor (or arrange a "purchase money loan" from a creditor). The assigned contract would waive the consumer's right to raise seller-related defenses against the assignee. So when the consumer discovered the fraud and stopped paying, the creditor would sue them and win, because the creditor was a "holder in due course" not subject to the seller's misconduct claims.

The FTC studied this for years. They found that the credit assignment system was actively profitable for fraudulent sellers — they could collect their money up front from the lender and walk away from the consumer entirely, leaving the consumer with both faulty goods and a non-defensible loan. The Holder Rule was the FTC's solution: by making the lender's loan subject to the consumer's claims against the seller, the rule eliminated the lender's incentive to fund deals with shady sellers.

The National Consumer Law Center calls the Holder Rule "the most effective action the FTC has ever taken to prevent and remedy consumer fraud." That is not marketing language — it is the considered judgment of the consumer protection bar after 49 years of practice with the rule.

How It Applies to Solar Loans

Solar financing is a textbook case of the kind of arrangement the Holder Rule was written for. The standard structure:

• The installer (Sunrun, Freedom Forever, Momentum, Vivint, Sunnova, etc.) sells the system through door-to-door, in-home, or virtual sales reps
• The installer has an enrolled-contractor relationship with one or more lenders (GoodLeap, Mosaic, Sunlight, Dividend, Service Finance)
• The installer steers the customer to that specific lender ("we have great financing options")
• The lender funds the deal directly, paying the installer the loan proceeds (minus any dealer fee that goes to the lender — see the dealer fee breakdown)
• The customer's loan documents include the FTC Holder Rule notice

That is the textbook "purchase money loan" arrangement that triggers Holder Rule coverage. The lender is not arms-length. The installer-lender relationship is documented in their enrolled-contractor agreements. The lender knows or should know what kind of sales practices the installer uses, because the lender is funding thousands or millions of those transactions.

The NY AG Attyx Case Made It Official for Solar

On March 17, 2026, New York Attorney General Letitia James filed a $275 million lawsuit against the solar installer Attyx. The complaint named two co-defendants: Solar Mosaic and WebBank. (Read the full NY AG breakdown.)

The AG's framing is significant because it explicitly applies Holder Rule reasoning to solar lending. From the press release accompanying the complaint:

"Attyx's lending partners, which include the companies Solar Mosaic and WebBank, further defrauded Attyx's customers by charging them hidden fees. Attyx and its lending partners concealed the lenders' fees by hiding them within the high prices the consumers were supposedly paying to Attyx for their solar systems. By concealing these fees, Attyx's lending partners unlawfully understated the loans' total costs and interest rates while overstating the amounts financed by the loans, making it impossible for consumers to learn the true costs of the loans they were receiving."

The AG is not arguing that Mosaic and WebBank were innocent victims of Attyx. The AG is arguing that Mosaic and WebBank participated in the scheme and are jointly liable for the fraud. The Holder Rule provides the federal regulatory foundation for that argument, on top of New York's General Business Law claims.

Once a state Attorney General establishes that lenders are joint defendants in a solar fraud case, individual homeowner cases with the same lenders get dramatically easier. The AG's discovery work, the AG's documentary findings, the AG's framing — all of it becomes available to private plaintiffs. This is why the 90-day window after major AG actions is so valuable.

How the Lenders Are Defending Against Holder Rule Claims

Three defenses, all with serious weaknesses:

Defense 1: "We are not a 'holder' subject to the rule."

Some lenders argue that because the loan was technically structured as a "purchase money loan" (where the lender writes a check to the consumer who then pays the installer) rather than as an "assigned contract" (where the seller's contract was sold to the lender), the rule's broader holder protections do not apply.

This defense usually loses. The FTC's own commentary, FDIC's Consumer Compliance Examination Manual, and the great weight of case law treat purchase-money-loan arrangements as falling squarely within Holder Rule coverage when there is a referral or business relationship between the seller and the lender. Solar installers and their preferred lenders almost always have such relationships, documented in enrolled-contractor agreements.

Defense 2: "The Holder Rule notice was not in the loan documents."

Some lenders argue that because their specific loan documents did not include the required FTC notice (or included it in defective format), they cannot be held liable as "holders" under the rule. There are two responses to this defense.

First, the absence of the notice does not eliminate the substantive Holder Rule liability — it eliminates the contractual mechanism for asserting it. The "close connection doctrine," recognized by courts including the Massachusetts Supreme Judicial Court in Ford Motor Credit Co. v. Morgan, 536 N.E.2d 587 (Mass. 1989), holds that lenders who are closely connected to the underlying transaction can be held to Holder Rule-equivalent liability even when the notice was missing.

Second, the absence of the notice was the seller's failure to comply with the rule, which itself is an unfair and deceptive practice. The seller's UDAP violation can be asserted against the lender under state law on a separate theory.

Defense 3: "Recovery is capped at amounts paid, so cancellation is not available."

Lenders sometimes argue that because the Holder Rule limits recovery to "amounts paid by the debtor," the consumer can only recover cash already paid — not cancel the remaining loan balance.

This is the most technically debatable defense. Some courts read the Holder Rule narrowly. But the practical answer is that even under the narrow reading, the consumer's defenses (claims arising from the seller's misconduct) can be raised against the lender's collection efforts. So even if the consumer cannot affirmatively recover beyond amounts paid, the consumer can defeat the lender's enforcement of the remaining balance — which produces the same practical result.

And the practical answer is bigger: lenders almost never want a Holder Rule case to go to trial. The discovery is bad for them. The optics are bad for them. The risk of an adverse ruling that establishes broader liability is bad for them. Settlement happens, and settlement typically involves principal reduction or full balance forgiveness, regardless of what the technical recovery cap might allow.

The Strongest Holder Rule Cases

From the case patterns I have reviewed, the strongest Holder Rule cases share three or four of these features:

1. Documented installer fraud or material breach — recorded sales calls, written promises that did not materialize, production data showing significant shortfall, unanswered warranty claims, or the installer's bankruptcy filing itself
2. The installer is dead, dying, or judgment-proof — installer bankruptcy, license revocation, or simply being too small to collect from. This forces the consumer to attack the lender, and forces the lender to actually engage with the case
3. The lender's relationship with the installer is documented — enrolled-contractor agreements, dealer fee structures, marketing materials promoting the lender's relationship with the installer
4. State UDAP claims stack on top — pursuing the lender under both the Holder Rule (federal) and the state UDAP statute (state) creates multiple liability theories. UDAP statutes often add treble damages and attorney's fees that are not available under the Holder Rule alone

The Bigger Picture

The FTC Holder Rule was written for exactly this moment. Forty-nine years ago, the agency saw that fraudulent sellers would always exist, but that the credit-financing infrastructure that enabled them did not have to. By making lenders share liability for sellers' misconduct, the rule was designed to force lenders to police their own enrolled-seller networks.

The solar industry is the rule's biggest test case in a generation. Hundreds of thousands of door-to-door sales, billions of dollars in loans, dealer fee structures designed to obscure true costs, salespeople contractually forbidden from disclosing material facts, installers going bankrupt and leaving warranty obligations stranded — this is the exact scenario the FTC was looking at when they wrote the rule in 1975.

The lenders who funded the modern solar boom are now learning what consumer protection lawyers have always known: when you fund deals with shady sellers, the Holder Rule eventually catches up to you. And it is catching up now.

Here Is What Actually Happens When We Take Your Case

We are not a referral mill. We review every case before we take it. If you meet the criteria — and most homeowners reading an article like this one do — here is what typically happens:

Outcome #1: Your contract gets completely canceled. You keep the system.

Read that again. That $30,000 loan, that $80,000 loan, that $150,000 loan — gone. Wiped. And the equipment on your roof? You keep it. It is yours. Hire a local electrician or solar tech to clean it up and tie it in properly, and you have got a functioning solar system for the cost of a service call.

Not a typo. That is the best-case outcome, and it is what we push for on every case we accept.

Outcome #2: Your loan gets massively reduced. Typically 40% to 60%.

Every case is different, but the pattern is consistent:

• A $150,000 loan knocked down to around $75,000
• A $70,000 loan cut to $35,000
• A $175,000 loan restructured to something you can actually live with

If we cannot completely kill the contract, we fight like hell to get the principal slashed — and we have a track record of doing it.

If we take your case and cannot deliver either outcome?

You get 40% of your fee back after we have exhausted every angle. That is our guarantee, in writing. Nobody else in this space puts that on paper. We do — because we only take cases we believe in.

The Bottom Line

If you have a residential solar loan and your installer committed fraud, breached the contract, went bankrupt, or otherwise failed to deliver what was promised — the Holder Rule says your lender is liable. That is federal law, codified at 16 C.F.R. § 433.2, on the books for 49 years, and currently being asserted against Solar Mosaic and WebBank by the New York Attorney General in a $275 million case.

You do not need to chase the installer. You can go directly at the lender. Your loan can be reduced, attacked, or canceled. The equipment on your roof can stay where it is.

This is what solar consumer protection law looks like in practice. The Holder Rule is the master key.

Related Reading

• 14 Legal Loopholes That Can Kill a Solar Contract
• The Hidden Dealer Fee — How Lenders Added 30% to Your Loan
• NY AG Sues Attyx for $275 Million — Mosaic and WebBank Named
• How to Cancel a Freedom Forever Contract After Bankruptcy
• GoodLeap Solar Loan Complaints — Complete Guide
• SunStrong Will Not Honor Sunnova & SunPower Warranties
• Momentum Solar Complaints 2026
• Texas AG Investigates Sunrun and Freedom Forever for Solar Fraud