For lenders’ violations of the Truth in Lending Act (“TILA”) the borrower has the right to rescind the transaction, meaning cancel the loan, by notifying the lender in writing within three years of the transaction.
In Jesinoski v. Countrywide Home Loans, Inc., decided January 13, 2015, the borrower sent the lender a letter to rescind the loan exactly three years after the loan transaction closed, and Bank of America responded, refusing to rescind. Over a year later, the borrower filed suit to rescind the loan. The District Court ruled in favor of the lender, saying the lawsuit was too late and the Eighth Circuit Court of Appeals agreed. The U.S. Supreme Court reversed, holding that the borrower had timely exercised the right to rescind by writing the letter, and did not need to initiate judicial enforcement action within the three years. While borrowers should be diligent in exercising their statutory protections, the Court extended the manner in which those rights are enforced. Lenders must take the TILA requirements seriously, especially with the new TILA-RESPA estimate and disclosure forms, which must be used beginning August 1, 2015.