The Truth In Lending Act (TILA) was designed to enhance the informed use of credit by requiring creditors to disclose, accurately and meaningfully, credit terms. If the required material disclosures are not made, TILA gives a borrower a three-year right to rescind the loan. See 15 U.S.C. § 1635(f). Williams v. Wells Fargo Home Mortgage, Inc., Case No. 10-1493, 2011 WL 395978 (3rd Cir. 2011), confirms, however, that the three-year limitations period is a statute of repose which is to be strictly enforced. Once the three-year period elapses, a right to rescind for inadequate disclosures under TILA is “completely extinguished.”
In Williams, Williams, disabled and blind, had paid off the mortgage on her Philadelphia home. In 2002, she contacted a home remodeling firm who estimated that her home was in need of roughly $25,000 in repairs. The home remodeling firm then sought, and obtained, financing on Williams’ behalf through Wells Fargo. On November 14, 2002 the loan agreement was signed, and the funds were then disbursed to Williams. However, almost half of the funds were automatically diverted toward paying delinquent bills, meaning that, of the $25,000 loan, Williams received only $13,820.83. The day after the funds were disbursed, Williams signed an agreement with the remodeling agency for repairs of $13,820.83 – an amount substantially different from the original $25,000 repair estimate, and, suspiciously, the exact amount that Williams had received from the loan after her old bills were paid.
In April 2003, Williams’ loan payment was $20 short. Refusing to accept anything less than the exact amount required under the loan agreement, Wells Fargo foreclosed on the loan. After making multiple, unsuccessful attempts for protection from foreclosure, on November 22, 2004 Williams’ attorney sent a letter to Wells Fargo seeking rescission of the loan under TILA. Wells Fargo did not respond.
On August 22, 2006, Williams sued Wells Fargo in District Court alleging, among other claims, that Wells Fargo had failed to comply with TILA and that this failure entitled Williams to rescission of the loan. The District Court granted summary judgment in favor of Wells Fargo, concluding that Williams’ claim under TILA was time-barred by the three-year limitations period of § 1635(f), which had expired on November 14, 2005.
Williams appealed, but the Third Circuit affirmed, holding that the three-year period pertained to the time within which an action for rescission must be commenced, not just notice of intent to seek rescission. The Third Circuit also rejected Williams argument that the limitations period should be equitably tolled. Clearing up a mistake made in an earlier decision, the Court explained that the § 1635(f) is not merely a statute of limitations, but is a statute of repose which governs the life of the underlying right to rescind. “Because the right ceases to exist once a statute of repose has run,  equitable tolling cannot resurrect [a] right to rescind the credit transaction.” This line in the sand is, for obvious reasons, worth noting. If § 1635(f) is not to be tolled for Ms. Williams, then tolling, it appears, is impossible.