THE PRACTICE IN QUESTION INVOLVES THE TRANSFER OF AN INSTALLMENT CREDIT CONTRACT OR PROMISSORY NOTE BY THE SELLER TO A THIRD-PARTY CREDITOR. IN THIS MANNER, THE CREDITOR CAN CIRCUMVENT VALID CLAIMS AND DEFENSE OF CONSUMERS IN INSTALLMENT CREDIT TRANSACTIONS BY CLAIMING TO BE A HOLDER IN DUE COURSE OR BY INSERTING A WAIVER OF DEFENSE CLAUSE IN THE SALES CONTRACT. THE EFFECT OF BOTH OF THESE ACTIONS IS TO SEPARATE THE CONSUMER'S DUTY TO PAY FROM THE SELLER'S DUTY TO PERFORM. IN MARCH 1976, KENTUCKY ENACTED A LAW THAT PARTIALLY LIMITS THE ABILITY OF THE CREDITOR TO ENGAGE IN SUCH CUT-OFF PRACTICES. THE FEDERAL TRADE COMMISSION (FTC) PROMULGATED A RULE THAT IS MORE PERVASIVE THAN THE KENTUCKY STATUTE. THE FTC RULE WILL BRING UNIFORMITY TO THE HAPHAZARD PATTERN OF CONSUMER PROTECTION AGAINST CUT-OFFS BUT IS ALSO LIMITED IN ITS APPLICATION. THE HISTORY OF SELLER MISCONDUCT AND CUT-OFF DEVICES IN KENTUCKY IS TRACED, AND THE KENTUCKY STATUTE IS ANALYZED IN LIGHT OF THE FTC REGULATION. SPECULATION ABOUT THE POSSIBLE EFFECTS OF SUCH STATUTES AND REGULATIONS IS DISCUSSED. IT IS CONCLUDED THAT, TOGETHER, THE STATE LAW AND THE FEDERAL REGULATIONS PROVIDE ADEQUATE BUT NOT COMPLETE PROTECTION AGAINST CUT-OFF DEVICES. RECOMMENDATIONS FOR EXTENDING THE COVERAGE OF THE STATE LAW AND FOR AMENDING THE REQUIREMENTS OF THE FTC REGULATION ARE OFFERED. (LM)