Striking a Balance: When to Extend the Right to Rescind Under TILA

Authors

Kimberley Ayer

Document Type

Note

Abstract

(Excerpt)

When lenders do not include the expiration date of the rescission period in the borrower’s paperwork, courts should employ a rebuttable presumption that the borrower did not know when the rescission period ended and is entitled to the extended three-year rescission period. Such a presumption would uphold the purpose of TILA by providing protection for the borrower and also would ensure that lenders have an incentive to include the expiration date of the rescission period in the borrower’s rescission notice. The burden of proof must be on the lender to rebut that presumption by demonstrating that the borrower did know when the three-day rescission period expired. Use of this rebuttable presumption would result in two significant benefits. First, courts would be able to provide relief to consumers who were taken advantage of by predatory lenders during the subprime mortgage boom. Second, courts would not be forced to reward consumers who did understand the nature of the rescission period but nevertheless are attempting to use a minor technical TILA violation as a loophole to get out of a bad mortgage.