US Sup Ct Rules Rescission of Loan Only Requires Written Notice & Not Filing of Suit Within 3 Years

US Supreme Court decision (January 13, 2015).

This case addressed the issue of what steps a borrower must take in order to effectively rescind a loan under the Truth in Lending Act. The threshold issue was whether a borrower exercises rescission rights by merely providing written notice to his or her lender, or whether a lawsuit must also be filed before the 3 year statute of limitations period elapses.

The borrowers in this case refinanced their property on February 23, 2007, with a loan in the amount of $611,000 from Countrywide Home Loans. Exactly three years later (February 23, 2010) the borrowers mailed Countrywide a letter that provided Countrywide with notice that they intended to rescind the loan. Countrywide’s successor, Bank of America, refused to acknowledge the rescission and the borrowers filed suit in the Federal District Court in which they sought a declaration that they had rescinded the loan and damages. The trial court granted Bank of America a judgment on the pleadings after finding that the Truth in Lending Act requires a borrower seeking rescission to file a lawsuit within 3 years of the consummation of the loan and the borrowers had not filed their complaint until 4 years and one day after the loan was consummated.

In reversing prior decisions on the issue, the Supreme Court ruled that the language of the Truth in Lending Act is clear and leaves no doubt that a rescission is effected when the borrower notifies the lender of his intention to rescind, and there is no requirement for suit to be filed within that 3 year period. As long as the borrower notifies the lender within 3 years after the transaction is consummated, the rescission is timely.

See case decision:Jesinoski_v__Countrywide_Hom