This right shields a holder in due course from the risk of taking instruments without full knowledge of their history.
The rule is particularly problematic in the consumer debt context where a business offers to finance a consumer purchase by accepting a promissory note signed by a consumer for part or all of the balance in lieu of tender of the full cash price, then sells the note to a bank (technically, by selling an assignment of its rights in the note) in order to immediately record a profit.
The holder on due course rule allows banks to take an "empty head and pure heart" approach to buying loans, and to close their eyes to anything beyond the face of a promissory note when due diligence would reveal obvious irregularities in how that note was originated.
If the business has already closed and liquidated, the consumer may be left without recourse unless they can overcome the arduous barrier of piercing the corporate veil to reach the proprietor's personal assets.
In 1971, the U.S. Federal Trade Commission (FTC) began to study this issue and found "widespread evidence of abuse and injury" to American consumers.