U.S. Supreme Court Holds Borrowers’ Written Notice Within 3 Years of Closing Sufficient to Rescind
On January 13, 2015, the United States Supreme Court held that a borrower may properly exercise his or her right of rescission under the Truth in Lending Act (“TILA”) by simply providing written notice to his or her lender within three years of the closing of the loan and is not required to file a lawsuit within that period. See Jesinowski v. Countrywide, 2015 WL 144681 (2015). Under TILA (15 U.S.C. § 1635), a borrower is given three days from the consummation of the transaction and the delivery of the materi al disclosures during which he or she may rescind the transaction. If the lender fails to proffer the required disclosures, however, the borrower has three years during which to rescind. In Jesinowski, the borrowers mailed a letter to the lender purporting to rescind the loan three years to the day that they refinanced and claimed that the lender had failed to give them the proper number of disclosures at their closing. The bank, which argued that it had indeed given the proper number of disclosures, responded and denied the rescission. The borrowers filed suit a year later. The District Court rejected the borrowers’ claim, holding that even if the lender had failed to give the proper disclosures, TILA only allows three years during which the borrower may file a lawsuit, and because the borrowers had waited over four years to do so they could not rescind. The Eighth Circuit affirmed, citing its own 2013 decision. The Supreme Court reversed, however, and held that the borrowers had exercised their rights under TILA when they sent their letter to the lender and were not required to file a lawsuit within the three-year period. Under the plain language of the statute, the right of rescission is exercised “by notifying the creditor” and does not require a lawsuit. In doing so, the Court rejected the lender’s argument that a lawsuit must be filed within three years if the parties dispute the adequacy of the disclosures, as it found that there is no basis in the statute for such an argument.
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