THREE-YEAR RIGHT TO RESCIND

Over the years many of you have heard me discuss the rescission rules contained in Regulation Z. I always explained that if the lender screws up and fails to give the notice, fails to give a timely notice, fails to give the correct notice, fails to properly complete the notice, fails to wait three days before distributing the form, fails to give timely and accurate TIL disclosures, or makes any one of several other errors the borrower has three years, not three days, to rescind the transaction.

In a recent case the court is considering whether the borrower must first file suit against the lender within three years, when the borrower exercises the right to rescind in a timely manner, but the lender does not recognize the rescission.

The Consumer Financial Protection Bureau (CFPB) submitted an amicus brief stating the belief the suit does not need to be filed within the three years period if the borrower has provided timely notice. This one of many similar cases being considered in various federal appeals courts at present. The CFPB intends to file similar briefs in several other cases.

Until decisions are rendered the safe course of action is to grant the right to rescind in similar situations.

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