Truth in Lending: Supreme Court Decision in Jesinoski Resolves Split in Circuits

 

 In a unanimous decision, the United States Supreme Court has ruled that a borrower exercising his right of rescission under the Truth in Lending Act need only provide written notice of rescission to his lender within three years and is not required to file suit within that same three year period.  Jesinoski v. Countrywide Home Loans, 574 U.S.____ (2015).   In so ruling, the Court stated that the language of 15 U.S.C. 1635 “leaves no doubt that rescission is effected when the borrower notified the creditor of his intention to rescind.”    

              In Jesinoski, the borrowers sent the lender written notice of rescission via letter exactly three years after borrowing money to refinance their home.  The lender refused to acknowledge the rescission’s validity.  A year later, the borrowers filed suit seeking a declaration of rescission and damages.  The district court granted the lender’s motion for judgment on the pleadings, concluding rescission could only be exercised by filing suit within three years of the loan’s consummation.  The Eight Circuit affirmed. 

Under the Truth in Lending Act, the time period in which to rescind depends upon whether the lender delivered all required disclosures to the borrower.  If all disclosures were delivered to the borrower, the borrower has three business days from later of the date of loan consummation or the date of delivery of all disclosures to rescind.  However, if all required disclosures are not delivered, the statute sets an outer limit by providing the borrower with three years from the date the loan was consummated to rescind.  15 U.S.C. 1635(a).  The Court relied upon the language of 15 U.S.C. 1635 which provides that a borrower “shall have the right to rescind… by notifying the creditor in accordance with the regulations of the Board, of his intention to do so.”   While the statute provides the time period in which notice must be provided, it does not provide the manner in which notice must be provided.  Thus, the court concluded that there is no requirement that suit be brought within that same time period.  The Court’s decision resolves a split between the circuits.