The Consumer Financial Protection Bureau has filed an amicus brief, weighing in on a truth-in-lending dispute pending before the U.S. Court of Appeals for the 10th Circuit.
The case, Rosenfield v. HSBC Bank USA, concerns a consumer’s right to rescind a mortgage after the consummation of the loan. Under the Truth in Lending Act, a consumer has three days to do so - unless the lender fails to provide the consumer with disclosures mandated by the law. If the disclosures are not provided, the right to rescind expires after three years.
When a consumer cancels a loan, the consumer must return the money and the lender must release its liens against the property.
According to the CFPB, “many courts incorrectly restrict consumers’ rescission rights,” requiring them to both exercise the right by notifying the lender and also to sue the lender, all within the same three-year period.
“As a result, these courts have erroneously dismissed rescission lawsuits as untimely, leaving consumers unable to litigate their claims on the merits,” according to the brief.
The CFPB argues that if the lender ignores the consumer’s timely notice or refuses to cancel the loan, the courts can determine in subsequent litigation whether the consumer’s exercise of the right to rescind was valid - even if that litigation starts after the three-year timeframe has expired.
“We are committed to making sure that borrowers can exercise their rights to the full extent allowed under this law,” said CFPB Director Richard Cordray in a news release. “The consumer’s right to cancel gives lenders a powerful incentive to provide the disclosures that consumers need to make good financial choices.”
The new agency has filed two other solo amicus briefs, both concerning the Fair Debt Collection Practices Act: Marx v. General Revenue Corp. (10th Circuit) and Birster v. American Home Mortgage Servicing, Inc. (11th Circuit).