The Appellate Court of Illinois recently found that borrowers bringing a claim under the Truth in Lending Act (“TILA”) for a lender’s refusal to rescind a mortgage must bring the action within one year of the lender’s violation. See U.S. Bank Nat’l Ass'n v. Miller, 2020 IL App (1st) 191029 (Ill. App. 2020). The defendant borrowers refinanced their mortgage in 2007. In 2009, the plaintiff lender initiated a foreclosure action and, in 2011, defendants filed a counterclaim that plaintiff violated TILA by changing the loan terms at closing and failing to provide required disclosures. Defendants also claimed that they rescinded the loan in 2010 but that plaintiff did not respond within the required 20 days. Through the counterclaim, defendants sought both rescission of the loan and mortgage under 15 U.S.C. § 1635(b), as well as costs and attorneys’ fees under 15 U.S.C. § 1640. Plaintiff argued that the TILA counterclaim was untimely and the trial court agreed, dismissing the counterclaim.
On appeal, the Court affirmed. First, the Court found that the claim under section 1640 is untimely. Section 1640(e) states that any action brought under it must be commenced within one year from the violation. In this case, defendants waited one year and four months from after plaintiff failed to respond to the rescission request to bring the counterclaim. Second, the Court found that the one-year statute of limitations found in section 1640 should apply to section 1635. The Court noted that section 1635 does not provide a limitations period and that some federal circuit courts have applied state limitations periods to rescission claims. It further noted that some district courts, including the Northern District of Illinois, have borrowed section 1640’s one-year period and applied it to section 1635. Thus, although the Court stated that “[t]his split in federal authority begs our supreme court to take up the question of the appropriate statute of limitations for claims arising under section 1635 of TILA,” it agreed with the District Court cases that a one-year period should apply. “[W]ithin 20 days of sending a notice of rescission, the borrower knows whether the bank will respect that notice. It is difficult to conceive of a justification for a lengthy statute of limitations, where the accrual of a claim is so straightforward.”