On January 13, 2015, the U.S. Supreme Court held that borrowers exercising their right to rescind a loan under the Truth in Lending Act must provide written notice to their lender within the three-year rescission period but are not required to file suit within that period.
The Act provides borrowers a conditional right to rescind a loan for "three years after the date of consummation of the transaction or upon the sale of the property, whichever comes first." Petitioners refinanced their home mortgage by borrowing from Countrywide Home Loans, Inc. Exactly three years later, they mailed respondents a letter purporting to rescind the loan. Respondents refused to acknowledge the validity of the rescission, maintaining that the disclosures had been proper. One year after sending their letter, the petitioners filed suit seeking a declaration of rescission and damages. The district court concluded that the suit was untimely because the Truth in Lending Act required it to be filed within three years of the transaction's consummation. The Eighth Circuit affirmed.
The Supreme Court reversed. The text of the Truth in Lending Act provides that a borrower may exercise the right to rescind "by notifying the creditor, in accordance with regulations of the [Federal Reserve] Board, of his intention to do so." The Court found that this language "explains in unequivocal terms how the right to rescind is to be exercised," and held that if it is exercised in this way "within three years after the transaction is consummated, [the] rescission is timely."
Faegre Baker Daniels LLP was among the counsel representing the respondents.
Justice Scalia delivered the unanimous opinion of the Court.