Supreme Court Rules Written Notice Is Sufficient To Rescind Under TILA

Action Item: In light of the United States Supreme Court's decision in Jesinoski, lenders should be aware that written notice provided by the borrower, within three years of the loan consummation, is sufficient to exercise his/her right to rescission under TILA. A borrower need not file a lawsuit to rescind within three years after the closing of the loan transaction.

The Supreme Court of the United States recently held that a borrower can exercise its right to rescind a loan pursuant to the federal Truth in Lending Act (“TILA”) by providing written notice to the lender within three years of the loan closing date. In doing so, the Supreme Court reversed the Court of Appeals for the Eighth Circuit's affirmation of the District Court of Minnesota's decision, which had held that a borrower must file a lawsuit within three years of the consummation of the loan to exercise his/her rescission rights.

In Jesinoski v. Countrywide Home Loans, Inc., the Supreme Court considered “whether a borrower exercises this right by providing written notice to his lender, or whether he must also file a lawsuit before the 3-year period elapses.” Jesinoski v.Countrywide Home Loans, Inc., No. 13-684, 574 U.S. (2015).

Under TILA, borrowers have the right to rescind certain consumer mortgage transactions for up to three days after the loan closes. Specifically, TILA grants borrowers the right to rescind a loan transaction, “until midnight of the third business day following the consummation of the transaction or the delivery of the [disclosures required by the Act], whichever is later, by notifying the creditor, in accordance with regulations of the [Federal Reserve] Board, of his intention to do so.” 15 U.S.C. 1635(a). However, if the creditor fails to provide requisite TILA disclosures, a borrower may rescind the transaction for up to three years from the date the loan closes. 15 U.S.C. 1635(f).

On February 23, 2007, Larry and Cheryle Jesinoski (Petitioners orJesinoskis) refinanced their home loan and obtained a mortgage from Countrywide Home Loans, Inc. (Respondent orLender) in the amount of $611,000. Exactly three years later, the Jesinoskis mailed a purported rescission notice to the Lender. The Lender responded on March 12, 2010, and refused to acknowledge the validity of the rescission. On February 24, 2011one year after the Jesinoskis sent their notice of rescissionthe Jesinoskis filed suit in the District Court of Minnesota, seeking rescission of the...