TILA versus TILA: Resolved in Favor of Consumers 


Commentary and Analysis

January 13, 2015
Courts in Conflict
Plaintiff's Position









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On September 2, 2014, I published an article, entitled "TILA versus TILA: Rescission by Notice or Lawsuit." To read the website article, please visit HERE. If you want the PDF version, please visit HERE or HERE. The US Supreme Court has just ruled today in favor of the consumer!


The litigation I discussed, specifically, was Jesinoski v. Countrywide Home Loans, Inc. Jesinoski v. Countrywide cited Section 1635 of the Truth in Lending Act ("Act") to present the foundation upon which the deliberations were to proceed. My article took up a review of the central question that was on its way to the US Supreme Court for adjudication in this case:


"Whether the Truth in Lending Act entitles homeowners to rescind their mortgage commitment by notifying the lender in writing within the period specified by the statute, or whether the homeowner must file a lawsuit to make the rescission effective."


At issue in the subject case was the question of notification by the borrower to the lender regarding rescission within a required time frame itself; to wit, within three years of consummation of the loan transaction, is "notification" met where the borrower has provided written notification to the creditor, thereby exercising the right of rescission, or only where the borrower brings a lawsuit against the creditor?


It may seem that the answer is pretty much clear, based on the actual verbiage of the applicable provision in the Act. But, as the saying goes, that's what courts are for!


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Several Circuit Courts had considered the question in tangentially related litigation brought by other plaintiffs, with differing decisions, such cases brought by plaintiff's with certain claims somewhat similar to Jesinoski. The Jesinoski litigation has steadily moved up the chain of command until it recently arrived at the U. S. Supreme Court. 


The First, Sixth, Eighth, Ninth, and Tenth Circuit Courts refused to recognize that all these plaintiffs had validly rescinded their mortgage. Regarding the Jesinoskis, the Eight Circuit held that the Act required the Jesinoskis to file a lawsuit to rescind. But, in such similar cases, the Third, Fourth, and Eleventh Circuits held that written notification is all that was required. 


The case moved to the US Supreme Court.

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The Jesinoski's position can be briefly stated thus:


TILA creates a "right to rescind" the loan transaction within "three business days" of the delivery of all the required disclosures, and a borrower exercises that right simply "by notifying the creditor." Furthermore, the Act provides that the rescission right "shall expire three years" after the closing of the transaction, even if all the required disclosures have not been delivered.


But when the Jesinoskis sought to exercise their rescission right by sending their creditors a written notice within the three year timeframe, the creditors refused to honor the Jesinoski's right to rescind.

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