A notice of rescission under the Truth in Lending Act is the topic of this blog post.
A notice of rescission under the Truth in Lending Act (TILA) has become more widely used since the United States Supreme Court ruled unanimously in the case of Jesinoski v. Countrywide Home Loans that a borrower exercising their right to rescind under TILA only has to provide written notice to their lender within the 3-year period, they are not required to file suit within that period.
A notice of rescission under the Truth in Lending Act is sent under the provisions of TILA which are found in 15 U.S.C. section 1635 and also by the provisions of Regulation Z found in 12 C.F.R. 226.23(b)(5). 15 U.S.C. §1641(c) states that the right of rescission applies to any assignee of the obligation.
A notice of rescission under the Truth in Lending Act is commonly used by a homeowner who contends that the lender or their assignee violated TILA for various reasons including that the disclosure statement was defective in some way such as a failure to disclose the Annual Percentage Rate (APR) or an under-disclosure of the APR and/or finance charges, existence of a variable rate feature, total amount financed, total of the payments, or a failure to provide copies of other required notices such as in a refinance transaction where each borrower or person with ownership interest in the property did not receive two copies each of the federally required notice of right to cancel, failure to properly disclose the date or dates that the rescission period expires, etc. If each borrower or person with ownership interest in a refinance transaction was not provided two adequate copies of this Notice, an extended three year right to rescind is permitted under TILA.
Valid service of the notice of rescission under the Federal Truth in Lending Act on the lender or their assignee renders any security interest in the real property void pursuant to 15 U.S.C. § 1635; Regulation Z, § 226.23 and the lender has twenty days to return all of the payments made by the homeowner on the loan and to terminate their security interest in the real property. However that in some circumstances the homeowner may have to tender money although some published cases suggest that a Court can exercise its “equitable discretion” under TILA and allow the borrower to make payments over time as part of meeting the borrower’s tender requirement such as reducing the monthly payment over a period of time. See for example In re Stuart, 367 B.R. 541, 552 (Bankr.E.D.Pa.2007); Shepeard v. Quality Sliding & Window Factory, Inc., 730 F.Supp. 1295 (D.Del.1990) (allowing borrower to satisfy tender obligation by making monthly payments), and Mayfield v. Vanguard Sav. & Loan Ass’n, 710 F.Supp. 143, 149 (E.D.Pa.1989) (allowing borrower to satisfy tender obligation by making monthly payment).
The decision as to whether or not to serve a notice of rescission under the Federal Truth in Lending Act to a lender or their assignee should only be made after careful consideration of both the unique circumstances and facts of any given situation.
Sample notice of rescission under the Truth in Lending Act in Word format.
Attorneys or parties who would like to view or download a sample notice of rescission under TILA available in Word or PDF format created by the author can see below.
Sample Notice of Rescission Under Truth in Lending Act by Stan Burman on Scribd
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Please note that the author of this blog post, Stan Burman is NOT an attorney and as such is unable to provide any specific legal advice. The author is NOT engaged in providing any legal, financial, or other professional services, and any information contained in this blog post is NOT intended to constitute legal advice.
The materials and information contained in this blog post have been prepared by Stan Burman for informational purposes only and are not legal advice. Transmission of the information contained in this blog post is not intended to create, and receipt does not constitute, any business relationship between the author and any readers. Readers should not act upon this information without seeking professional counsel.