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Consumer Financial Services Alert
Supreme Court Grants Certiorari on Notice of Rescission Under TILA

The United States Supreme Court indicated that it will review an opinion from the United States Court of Appeals for the Eighth Circuit involving whether notice alone was sufficient to effectuate a rescission under the Truth in Lending Act. In two separate opinions, the Eighth Circuit has ruled that mailing a notice of rescission within three years of consummating the loan was insufficient to preserve a borrower’s right to rescission when the borrower fails to file suit during the statute’s three-year rescission period.

The petitioners filed a petition for writ of certiorari asking the Supreme Court to decide whether a borrower exercises his right to rescind a transaction in satisfaction of the requirements of TILA by “notifying the creditor” in writing within three years of consummation of the transaction or must a borrower file a lawsuit within three years of consummation of the transaction. The case has important implications given the circuit split and the CFPB’s position on rescission rights under TILA. The Eighth Circuit rulings are a rejection of the CFPB’s interpretation of rescission rights under TILA. In amici briefs filed with the Tenth Circuit (see April 3, 2012 Alert) and three other circuits including the Third, Fourth and Eighth circuits, the CFPB argued that the rescission period under TILA only defines the time to notify the lender and not the time to sue the lender. Further, while the Eighth Circuit’s rulings align with rulings in the First, Sixth, Ninth and Tenth circuits, the Third, Fourth and Eleventh Circuits have held the opposition.

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