Alert February 21, 2012

Ninth Circuit Holds that Rescission Claims Expire Within Three Years of Loan Consummation, Regardless of When Notice of Rescission Sent

In a case of first impression, the United States Court of Appeals for the Ninth Circuit recently affirmed a lower court decision dismissing a Truth in Lending Act rescission claim as untimely, although the notice of rescission was timely provided and the parties had agreed to waive the three-year statute of limitations. Plaintiff alleged that she was never given proper notice of her right to rescind her loan and, approximately two years after the loan closed, notified Bank of America of her intent to rescind the loan. Although Bank of America denied that its disclosures were inappropriate and refused to rescind the loan, plaintiff's complaint alleged that she and Bank of America were involved in lengthy negotiations regarding the rescission, which included an agreement to waive TILA's three-year statute of limitations. Relying on a 1998 decision by the Supreme Court, Beach v. Ocwen Fed. Bank, 523, U.S. 410, and an earlier Ninth Circuit opinion, Miguel v. Country Funding Corp., 309 F.3d 1161 (2002), the court held that TILA's three-year limitations period is actually a statute of repose, that extinguishes any claim not instituted within the three-year period. Accordingly, although plaintiff timely filed her notice of rescission, and reached a tolling agreement with Bank of America, her failure to timely file her rescission suit resulted in her claims being forever extinguished. Click here for a copy of McOmie-Gray v. Bank of America Home Loans (formerly Countrywide Home Loans, Inc.), No. 00-16487 (9th Cir. Feb. 8, 2012).