Alert July 23, 2013

Eighth Circuit Holds Notice Alone is Insufficient to Effectuate TILA Rescission

Adding to the split among circuits, the United States Circuit Court for the Eighth Circuit held that providing written notice to a lender of intent to exercise the right rescind under the Truth in Lending Act is insufficient to preserve a borrower’s right to rescission when the borrower fails to also file suit during the statute’s three-year rescission period. In reaching its decision, the Court relied heavily on the Tenth Circuit’s reasoning in Rosenfield v. HSBC Bank, USA, 681 F.3d 1172 (10th Cir. 2012) (see June 12, 2012 Alert), noting that “[t]he nature of a statute of repose and the remedy of rescission, in addition to the uncertainties as to title that would likely occur if the right is not effectuated by court filing within three years of the underlying transaction, are each compelling reasons for” its holding. The Court also noted that its interpretation of rescission rights under TILA did not create dissonance between the statute and Regulation Z. According to the Court, Regulation Z requires “notice to the lender of an intent to rescind, and the statute requires that rescission be accomplished within three years or the right expires.” The Eighth Circuit ruling is a rejection of the CFPB’s interpretation of rescission rights under TILA. In amici briefs filed with the Tenth Circuit (see April 3, 2012 Alert) and three other circuits including the Third, Fourth and Eighth circuits, the CFPB argued that the rescission period under TILA only defines the time to notify the lender and not the time to sue the lender.