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Last week I wrote about Household Goods and Personal Effects under the FTC Credit Practices Rule, and when items may be taken as collateral for a non-purchase money loan.  See here. Several people have asked for some clarification—particularly mentioning home computers, laptops, iPads, and smartphones.  

I think there are two questions to consider in determining whether such items fall within or without the definition of Household Goods and Personal Effects under the FTC Rule.

First, the definition of Household Goods specifically excludes “electronic entertainment equipment.” Is it reasonable to say that a computer or an iPad is electronic entertainment equipment?  Well, arguably, in my house it is. Surely a Sonos Bar fits under “entertainment equipment.” And, turntables seem to be making a retro-comeback.

Second, “Personal Effects” may not be taken as collateral in a non-purchase money transaction. But, what is an iPhone, Galaxy, or other smartphone? Are those electronic entertainment devices? Are they Personal Effects that an individual would ordinarily carry about on his or her person? Or, is the answer simply that this entire category of items is now off-limits because they have become virtual necessities in modern society? If so, an old FTC Advisory Letter (from 1985) would treat these as prohibited Household Goods.

To my knowledge, the FTC has not offered more guidance on these types of questions. It may be that there are a host of collateral options out there that we have not been considering.  

If, as and when Garnishment becomes more problematic to collect debt, finance companies will need to get more creative with the types of collateral that may qualify as exceptions to the Household Goods definition under the Credit Practices Rule.