InstaBidsCan you stop paying a contractor-arranged loan if the work is bad?
Not as a stated right in the federal rules quoted here, except for credit cards. For other credit, the FTC Holder Rule says it is an unfair or deceptive practice for a seller to take a consumer credit contract without a notice that any holder is subject to all claims and defenses the debtor could assert against the seller.
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Source: 12 CFR 1026.12, Special credit card provisions, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
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Key facts
- 16 CFR 433.2(a), the required notice: "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 PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
- FTC Holder in Due Course Rule page, Rule Summary: "Specifically, it preserves consumers' right to assert the same legal claims and defenses against anyone who purchases the credit contract, as they would have against the seller who originally provided the credit."
Source: FTC, Holder in Due Course Rule, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
- 16 CFR 433.1(d): "(2) is affiliated with the creditor by common control, contract, or business arrangement."
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
- 12 CFR 1026.12(c)(1): "The cardholder may withhold payment up to the amount of credit outstanding for the property or services that gave rise to the dispute and any finance or other charges imposed on that amount."
Source: 12 CFR 1026.12, Special credit card provisions, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
What does the Holder Rule make a seller put in the contract?
A notice in at least ten point, bold face type, saying any holder of the contract is subject to all claims and defenses the debtor could assert against the seller; 16 CFR 433.2 is quoted below in its own words.
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
16 CFR Part 433, read 22 October 2026, opens section 433.2 with this sentence: "In connection with any sale or lease of goods or services to consumers, in or affecting commerce as “commerce” is defined in the Federal Trade Commission Act, it is an unfair or deceptive act or practice within the meaning of section 5 of that Act for a seller, directly or indirectly, to:"
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Item (a) of that list, with the notice it requires, in its own words: "(a) Take or receive a consumer credit contract which fails to contain the following provision in at least ten point, bold face, type:" "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 PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
The FTC's Holder in Due Course Rule page, read 22 October 2026, says in its Rule Summary that the rule "protects consumers when merchants sell a consumer's credit contracts to other lenders." It goes on: "Specifically, it preserves consumers' right to assert the same legal claims and defenses against anyone who purchases the credit contract, as they would have against the seller who originally provided the credit."
Source: FTC, Holder in Due Course Rule, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Which contractor loans does the notice cover?
Two kinds appear in Part 433: a credit contract the seller takes or receives, and a purchase money loan from a lender the seller refers consumers to or is affiliated with; the definitions are quoted below.
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Item (b) of 16 CFR 433.2, read 22 October 2026: "(b) Accept, as full or partial payment for such sale or lease, the proceeds of any purchase money loan (as purchase money loan is defined herein), unless any consumer credit contract made in connection with such purchase money loan contains the following provision in at least ten point, bold face, type:"
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
16 CFR 433.1(d) defines that loan: "(d) Purchase money loan. A cash advance which is received by a consumer in return for a “Finance Charge” within the meaning of the Truth in Lending Act and Regulation Z, which is applied, in whole or substantial part, to a purchase of goods or services from a seller who" "(1) refers consumers to the creditor or" "(2) is affiliated with the creditor by common control, contract, or business arrangement."
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
The same section defines a consumer: "(b) Consumer. A natural person who seeks or acquires goods or services for personal, family, or household use."
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
An FTC press release of 14 April 2021, read 22 October 2026, says of a staff note correcting a 1976 FTC staff pamphlet that "the erroneous guidance contradicts a statement by the Commission that the application of the Rule does not depend on the amount of the transaction."
Source: FTC press release, FTC Staff Issues Note on Holder Rule and Large Transactions (14 April 2021), read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Does the notice let you stop making payments?
Part 433 does not say so in those words. The FTC describes the rule as preserving your right to assert claims and defenses against any holder of certain loans and credit sales contracts, quoted below.
Source: FTC press release, FTC Staff Issues Note on Holder Rule and Large Transactions (14 April 2021), read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
The FTC press release of 14 April 2021, in its own words: "The Holder Rule protects consumers who enter into credit contracts by preserving their right to assert claims and defenses against any holder of certain loans and credit sales contracts, even if the loans or contracts are assigned to a third party."
Source: FTC press release, FTC Staff Issues Note on Holder Rule and Large Transactions (14 April 2021), read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
The last sentence of the required notice sets its own limit: "RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
In our reading, the notice lets you raise against whoever holds the loan the claims and defenses you have against the contractor, and whether a defense lets you stop paying depends on the claims you have against the contractor under your contract and your state's law, which this page does not quote.
What changes if you paid the contractor by credit card?
A different rule applies, and it does speak of withholding payment: Regulation Z, 12 CFR 1026.12(c), says the cardholder may withhold payment up to the amount of credit outstanding for the disputed purchase, within limits quoted below.
Source: 12 CFR 1026.12, Special credit card provisions, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Part 433's own definition of a creditor leaves out card issuers: "(c) Creditor. A person who, in the ordinary course of business, lends purchase money or finances the sale of goods or services to consumers on a deferred payment basis; Provided, such person is not acting, for the purposes of a particular transaction, in the capacity of a credit card issuer."
Source: 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
12 CFR 1026.12(c)(1), read 22 October 2026: "(1) General rule. When a person who honors a credit card fails to resolve satisfactorily a dispute as to property or services purchased with the credit card in a consumer credit transaction, the cardholder may assert against the card issuer all claims (other than tort claims) and defenses arising out of the transaction and relating to the failure to resolve the dispute. The cardholder may withhold payment up to the amount of credit outstanding for the property or services that gave rise to the dispute and any finance or other charges imposed on that amount."
Source: 12 CFR 1026.12, Special credit card provisions, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Paragraph (c)(2), in its own words: "(2) Adverse credit reports prohibited. If, in accordance with paragraph (c)(1) of this section, the cardholder withholds payment of the amount of credit outstanding for the disputed transaction, the card issuer shall not report that amount as delinquent until the dispute is settled or judgment is rendered."
Source: 12 CFR 1026.12, Special credit card provisions, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
Paragraph (c)(3) lists the conditions; its first one, in its own words: "(i) General. The rights stated in paragraphs (c)(1) and (c)(2) of this section apply only if:" "(A) The cardholder has made a good faith attempt to resolve the dispute with the person honoring the credit card; and"
Source: 12 CFR 1026.12, Special credit card provisions, eCFR, read 22 October 2026 (our saved browser copy, as read on 2026-10-22).
What should you do before you hold back a payment?
Put the problem in writing to the contractor and to whoever holds the loan or card, and get advice before you miss a payment. This is practical reasoning, not legal advice and not a finding from any agency.
- Find the NOTICE box in your loan or financing papers, and note the name of the company that now collects your payments.
- Write down what is wrong with the work, with dates and photos, and send it to the contractor in writing. Keep a copy.
- Send the same written dispute to the lender or collector, naming the contract and the work.
- If you paid with a credit card, write to the card issuer about the disputed purchase as well, and keep proof that you first tried to settle it with the contractor.
- Before you stop or reduce any loan payment, ask a consumer lawyer, a legal aid office or your state attorney general's consumer protection office what that would mean for your account.
- Keep a record of every payment and every letter while the dispute is open.
When can a contractor see your contact details on InstaBids?
Contact details stay hidden until the homeowner picks a contractor and they confirm the connection.
Source: InstaBids process and privacy, live-page excerpts, read 22 October 2026.
Post your job on InstaBids, and contractors can bid in writing on one written scope.
Homeowners anywhere in the US can post a job; once you send it, InstaBids finds contractors to bid on it.
Start my requestSources for the facts on this page
- 16 CFR Part 433, Preservation of Consumers' Claims and Defenses, eCFR, read 22 October 2026
- FTC, Holder in Due Course Rule, read 22 October 2026
- FTC press release, FTC Staff Issues Note on Holder Rule and Large Transactions (14 April 2021), read 22 October 2026
- 12 CFR 1026.12, Special credit card provisions, eCFR, read 22 October 2026
- InstaBids process and privacy, live-page excerpts reviewed 22 October 2026.