South-Western Legal Studies in Business

Minor Quibbles about Rescission Notice Does Not Render It Ineffective
Description

Appeals court held that a notice required by TILA, that a consumer has the right to rescind certain loan agreements within three days, does not fail to be effective because some language in the notice can be claimed by some to be confusing. An ordinary consumer would understand the notice.

Topic

Consumer Protection

Key Words

Truth in Lending Act; Notice; Defect; Mortgage

C A S E   S U M M A R Y
Facts

Palmer obtained a debt-consolidation loan, secured by a mortgage on her residence, from Champion Mortgage. The closing occurred on March 28. At the closing, Palmer executed a promissory note, a mortgage, a TILA statement, and a settlement sheet. She did not take any copies of the documents with her, but received them by mail in several days. The TILA statement contained a notice of right to cancel: "You have a legal right under federal law to cancel this transaction, without cost, within three (3) business days from the date of the transaction or the date you received this notice of our right to cancel." It then stated that the notice must be made by April 1. It stated how such notice must be given in case of rescission. Over a year later, Palmer notified Champion of her intent to rescind the transaction. They refused. She sued, alleging that the April 1 deadline was impossible for her to meet because she received the papers in the mail on April 1 or after that date, so the rescission notice was defective. TILA provides that a failure of one or more material disclosures means the rescission period is extended for three years. The district court dismissed the suit; Palmer appealed.

Decision

Affirmed. The notice of right to rescind, which repeated that the debtor had three business days after receipt of notice within which to rescind, was not defective or confusing, even if it did mention a specific date. Hence, the three-year extension of the right to rescind was not triggered. The notice was identical in all material respects to the model form authored by the Federal Reserve Board. The average consumer would understand that April 1 was three business days after March 28, but that date would not be relevant in case rescission was made after receipt of the notice. TILA is concerned with misleading disclosures or a lack of any disclosure, not minor points of language that the average consumer would not be confused by. The notice is objectively reasonable. The issue that has been raised is harmless.

Citation

Palmer v. Champion Mortgage, 465 F.3d 24 (1st Cir., 2006)

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