Banking Alert
Consider forwarding to individuals in the following areas of your bank:
consumer lending and compliance.

U. S. Supreme Court Finds TILA Does Not Require a Borrower to File a Lawsuit to Rescind a Consumer Loan

On January 13, 2015, the United States Supreme Court decided that the Truth in Lending Act ("TILA") allows consumers to rescind loans secured by their principal dwellings anytime within three years following loan consummation by providing their lenders with written notice of rescission, if the borrowers were never given the disclosures required by TILA. See Jesinoski v. Countrywide Home Loans, Inc., No. 13-684 (U.S. Sup. Ct. 2015).

Congress passed TILA to help consumer borrowers avoid the uninformed use of credit, and to protect them from inaccurate and unfair credit billing. TILA gives consumer borrowers the unconditional right to rescind loans secured by their principal dwellings anytime within the three business day period following loan consummation or the delivery of required disclosures, whichever is later. Importantly, however, if the disclosures required by TILA are not provided, borrowers may still rescind their loans until three years after loan consummation or the property is sold, whichever comes first.

In Jesinoski, Countrywide Home Loans, Inc. argued that the extended rescission remedy can only be exercised through the filing of a lawsuit within three years of loan consummation. After reviewing TILA, however, the U.S. Supreme Court found no such requirement. According to the Supreme Court, rescission may be effected through a written notice of rescission anytime within the three-year window following loan consummation.

Although the long-term implications of Jesinoski remain uncertain, it will make it much easier for consumers to rescind loans secured by their principal dwellings. Following Jesinoski, banks should examine their lending and credit administration practices to identify opportunities to mitigate Jesinoski's impact on their consumer loan portfolios.

To find out more about how Jesinoski impacts your lending and credit administration practices, please contact Sandy Murphy or Floyd Boone.

  About the Authors:

Ms. Murphy and Mr. Boone are partners with Bowles Rice LLP. Ms. Murphy focuses her practice in banking and commercial law, and Mr. Boone focuses his practice in business litigation and class actions. Bowles Rice LLP is general counsel to the West Virginia Bankers Association and the Community Bankers of West Virginia.

Sandra M. Murphy

(304) 347-1131

Floyd Boone

(304) 347-1733

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  The author presents these materials with the understanding that the information provided is not legal advice. Due to the rapidly changing nature of the law, information contained in this publication may become outdated. Anyone using these materials should always research original sources of authority and update this information to ensure accuracy when dealing with a specific matter. No person should act or rely upon the information contained in this publication without seeking the advice of an attorney.

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