Alert May 15, 2012

Circuits Split on TILA’s Rescission Requirements

The Fourth Circuit adopted the CFPB’s interpretation of the Truth in Lending Act (see April 3 and April 17 Alerts) holding that notifying the lender, as opposed to filing a lawsuit, is sufficient to satisfy TILA’s rescission requirements. In its amicus brief, the CFPB took the position that the rescission period under TILA only defines the time to notify the lender and not the time to sue the lender. Using a plain language argument, the Fourth Circuit held that a borrower exercises his/her right of rescission merely by communicating in writing to the creditor his/her intention to rescind. The Court limited its opinion to the question of when a borrower has exercised the right to rescind, and did not address the additional question of when the rescission has been completed and the contract voided.  The Ninth Circuit has held that a borrower must file a lawsuit within the three-year time period in order to exercise the right to rescind. Click here for the opinion.