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1973 Wis. L. Rev. 471 (1973)
Preservation of Consumer Defenses in Interlocking Loans and Credit Card Transactions - Recent Statutes, Policies, and a Proposal

handle is hein.journals/wlr1973 and id is 485 raw text is: PRESERVATION OF CONSUMER DEFENSES IN INTERLOCKING LOANS AND CREDIT CARD TRANSACTIONS-RECENT STATUTES, POLICIES, AND A PROPOSALt NEIL 0. LITTLEFIELD* The problem of the preservation of consumer defenses in con- sumer credit transactions has had a relatively short but eventful legal life.1 Provisions of the Wisconsin Consumer Act2 represent a contemporary legislative response, but it is becoming increasingly evident that even the far-reaching provisions of that act do not nec- essarily solve the difficulties. This article will briefly survey the problem, analyze those statutes which-like the Wisconsin Act-go far in providing a solution, and then present some suggestions as to where future emphasis might be directed. In the process of re- viewing the development of a legal doctrine which preserves con- sumer defenses, it will be shown that while the doctrine has re- sponded to felt needs,3 there are perhaps new needs which can be t The author wishes to acknowledge with appreciation the continuing assistance of James Burger in the preparation and writing of this article. * Professor of Law, University of Denver. B.S., 1953, University of Maine; LL.B., 1957, Boston University; S.J.D., 1961, University of Michigan. 1. See, e.g., Commercial Credit Corp. v. Childs, 199 Ark. 1073, 137 S.W.2d 260 (1940); Gilmore, The Commercial Doctrine of Good Faith Purchase, 63 YALE L.J. 1057 (1954); Hogan, A Survey of State Retail In- stallment Sales Legislation, 44 CORNELL L.Q. 38 (1958); Kripke, Consumer Credit Regulation: A Creditor-Oriented Viewpoint, 68 COLUM. L. REV. 445 (1968); Littlefield, Good Faith Purchase of Consumer Paper: The Failure of the Subjective Test, 39 S. CAL. L. REv. 48 (1966); Shuchman, Consumer Credit by Adhesion Contracts, 35 TEMP. L.Q. 125 (1962). 2. WIs. STAT. chs. 421-27 (1971); id. §§ 422.406-.408 are especially sig- nificant here. 3. Felt needs, of course, are continually changing. The reaction of the courts was initially in response to the conventional consumer abuse whereby the seller received a note for the goods and immediately nego- tiated the note to one who qualified as a holder in due course. The merchant thereby received his payment from the holder in due course, the holder in due course had recourse on the note with the procedura advantages of holder in due course status even if the consumer failed to pay, and the unfortunate purchaser was burdened with an obligation to pay even though the goods and services turned out to be defective. The courts began to look behind the holder in due course status which the lender alleged to determine if, in fact, the note had been taken without notice and in good faith, requiring stricter standards to be met. See, e.g., Swanson v. Commercial Acceptance Corp., 381 F.2d 296 (9th Cir. 1967); Commercial Credit Corp. v. Childs, 199 Ark. 1073, 137 S.W.2d 260 (1940); Commercial Credit Corp. V. Orange County Mach. Works, 34 Cal. 2d 766, 214 P.2d 819 (1950); Calvert Credit Corp. v. Williams, 244 A.2d 494 (D.C.

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