16a-3-307. (UCCC) Certain negotiable instruments prohibited. With respect to a consumer credit sale or consumer lease, the creditor shall only accept currently dated negotiable instruments as evidence of the obligation of the buyer or lessee. For purposes of this section, a creditor shall not make the consumer credit sale contract or consumer lease contract a negotiable instrument.
History: L. 1973, ch. 85, § 53; L. 1981, ch. 93, § 9; L. 2024, ch. 6, § 75; January 1, 2025.
KANSAS COMMENT, 2000
This section, together with K.S.A. 16a-3-403, 16a-3-404, and 16a-3-405, states a major tenet of the U3C, that the holder in due course doctrine should be abrogated in consumer cases and that the assignee of any note or installment contract arising from a consumer credit sale or lease should be subject to any defenses and claims that the buyer had against the original seller or lessor arising out of the sale or lease. Whatever beneficial effects holder in due course doctrine may have in promoting the currency of paper is greatly outweighed by the harshness of its consequences in denying consumers the right to raise valid defenses arising out of consumer credit transactions. The first step in abolition of the doctrine is the prohibition found in this section against the use of negotiable instruments in consumer credit sales and consumer leases. The F.T.C. Holder in Due Course Regulations, 16 C.F.R. Part 433, also effectively abolishes the holder in due course doctrine in consumer credit sales and leases by requiring a printed legend on consumer contracts which renders the paper non-negotiable. See the Kansas comments to K.S.A. 16a-3-404 and 16a-3-405.
Law Review and Bar Journal References:
"Farmers and the Law: Exemptions and Exceptions," J. W. Looney, 50 J.B.A.K. 7, 16 (1981).
"History & Overview of the Uniform Consumer Credit Code," Ryan E. Hodge, J.K.T.L.A. Vol. XXVI, No. 3, 8 (2003).
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