Pre-Jesinoski, rescission already was a somewhat useful strategy for a delinquent borrower. – If successful, rescission essentially gave the borrower a free house for a period of time. – Lenders frequently were forced to modify loans and provide more favorable terms to borrowers.
Even if ultimately deemed invalid, a rescission claim delayed, for years, the disposition of any pending or future foreclosure action. (In the meantime, the borrower can continue living in the home for free.) •
Congress passed the Truth in Lending Act, 82 Stat. 146, as amended, to help consumers “avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing.” 15 U. S. C. §1601(a). To this end, the Act grants borrowers the right to rescind a loan “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.” §1635(a) (2006 ed.).* This regime grants borrowers an unconditional right to rescind for three days, after which they may rescind only if the lender failed to satisfy the Act’s disclosure requirements. But this conditional right to rescind does not last forever. Even if a lender never makes the required disclosures, the “right of rescission shall expire three years after the date of consummation of the transaction or upon the sale of the property, whichever comes first.” §1635(f).
Under Jesinoski, a borrower who defaults has an even greater incentive to rescind. – The borrower does not need to draft or file a complaint. – Initially, the borrower does not necessarily need to return any money. See TILA – Right of Rescission: The Impact of the Supreme Court’s Recent Decision in Jesinoski v. Countrywide
Exactly three years after borrowing money from respondent Countrywide Home Loans, Inc., to refinance their home mortgage, petitioners Larry and Cheryle Jesinoski sent Countrywide and respondent Bank of America Home Loans, which had acquired Countrywide, a letter purporting to rescind the transaction. Bank of America replied, refusing to acknowledge the rescission’s validity. One year and one day later, the Jesinoskis filed suit in federal court, seeking a declaration of rescission and damages.
The District Court entered judgment on the pleadings for respondents, concluding that a borrower can exercise the Truth in Lending Act’s right to rescind a loan, see 15 U. S. C. §1635(a), (f), only by filing a lawsuit within three years of the date the loan was consummated. The Jesinoskis’ complaint, filed four years and one day after the loan’s consummation, was ineffective. The Eighth Circuit affirmed. Held: A borrower exercising his right to rescind under the Act need only provide written notice to his lender within the 3-year period, not file suit within that period. Section 1635(a)’s unequivocal terms—a borrower “shall have the right to rescind . . . by notifying the creditor . . . of his intention to do so” (emphasis added)—leave no doubt that rescission is effected when the borrower notifies the creditor of his intention to rescind.
This conclusion is not altered by §1635(f), which states when the right to rescind must be exercised, but says nothing about how that right is exercised. Nor does §1635(g)—which states that “in addition to rescission the court may award relief . . . not relating to the right to rescind”—support respondents’ view that rescission is necessarily a consequence of judicial action. And the fact that the Act modified the common-law condition precedent to rescission at law, see §1635(b), hardly implies that the Act thereby codified rescission in equity. Pp. 2–5. 729 F. 3d 1092, reversed and remanded. SCALIA, J., delivered the opinion for a unanimous Court. See JESINOSKI ET UX. v. COUNTRYWIDE HOME LOANS, INC., ET AL. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT No. 13–684. Argued November 4, 2014—Decided January 13, 2015