The Truth in Lending Act (“TILA”) provides, in the event the lender fails to make certain required disclosures, a right in the consumer borrower to rescind a home loan “by notifying the creditor. . . of his intention to do so” within three years of the date the loan was consummate. 15 U.S.C. § 1635(a). However, how must the consumer notify the creditor of his intention to rescind? Must the consumer file a lawsuit seeking rescission, or may he rescind by simply sending the creditor a letter rescinding the loan? In its opinion in Jesinoski v. Countrywide Home Loans, Inc., 135 S. Ct. 790 (2015), the U.S. Supreme Court held that a simple letter will suffice.
In Jesinoski, the consumer borrowers sent a letter to Countrywide Home Loans rescinding their loan within three years following consummation of their loan. A year and a day after sending the letter, the Jesinoskis files a lawsuit seeking rescission and damages. The District Court entered a judgment in favor of Countrywide, holding that a borrower may exercise his or her right of rescission only by filing a lawsuit within three years after the loan is consummated. The Eight Circuit affirmed that decision, but the Supreme Court reversed.
The Supreme Court based its decision on the plain language of TILA. The statute states that a borrower has the right to rescind a loan “until midnight of the third business day following the consummation of the transaction or the delivery” of required disclosures under TILA, whichever is later by “notifying the creditor. . . of his intention to do so. 15 U.S.C. § 1635(a). If the lender never provides the required disclosures, then the consumer borrower’s right of rescission expires three years after the loan is consummated, or upon the sale of the property, whichever occurs first. 15 U.S.C. § 1635(f). The District Court and the Eighth Circuit both held that rescission under § 1635(f) can be effected only if the consumer files suit for rescission within three years after the loan is consummated. The Supreme Court held these conclusions to be in error.
In its opinion, the Supreme Court noted first that the plain language of § 1635(a) states that a consumer “shall have the right to rescind . . . by notifying the creditor, in accordance with regulations of the Board, of his intention to do so.” (emphasis in original). The Court went on to state that “nothing in § 1635(f) changes this conclusion.” Although § 1635(f) provides the deadline by which a consumer borrower must provide notice of rescission, the Court stated that the statute “says nothing about how that right is exercised.” The Court noted its prior decision in Beach v. Ocwen Fed. Bank, 523, U.S. 410, 417 (1998) that there was no federal right to rescind under § 1635(f) after the three year period expired, but that it did not address in Beach whether rescission required a suit be filed.
The Court stated that the plain language of § 1635(a) requires only written notice of rescission. Countrywide argued that, because it and the Jesinoskis disputed whether Countrywide had provided the required disclosures, rescission under the statute required the filing of a lawsuit and that a mere written notice did not suffice. The Court rejected this argument, stating that the language of § 1635(a) “nowhere suggests a distinction between disputed and undisputed rescissions.” Countrywide also argued that, since § 1635(g) empowers a court to award relief in addition to rescission in an action supported its argument that rescission requires a judgment awarding that relief. The Court rejected this argument also, holding that allowance of judicial remedies in addition to rescission does not mean that rescission can be accomplished only through legal action. Finally, the Court rejected Countrywide’s argument under common law, which provides that a party seeking rescission must return what he has received before rescission can occur. First, the Court noted that § 1635(b) of TILA disclaims the common law condition precedent to rescission that the borrower tender the proceeds received under the transaction. Second, the Court held that “Nothing in our jurisprudence, and no tool of statutory interpretation, requires that a congressional Act must be construed as implementing its closest common-law analogue.”